People are calling it The Great Resignation. In 2021 a record number of Americans have voluntarily resigned from their jobs, many in search of more pay, better working conditions, superior benefits, or more flexibility.
Tips To Protect Your Finances When You Resign
Whatever your reasons for resigning, it’s important to take steps to ensure that your finances are safe between paychecks. Follow these tips to plan for your resignation and safeguard your money while you make the transition.
- Decide why you are resigning
- Make a budget and plan your savings
- Have a plan before you resign
- Take on a side hustle to help with cash flow
- Downsize your lifestyle while you transition
Decide Why You are Resigning
Leaving a full-time job with a salary and benefits is a big decision. Knowing why you are doing it and what you hope to accomplish is essential when making this life-altering decision. Making a list of your goals can help you prepare for your resignation. Writing them down makes them real, and weighing the pros and cons will ensure you’ve considered all sides.
📝 Tip #1:
List out your goals for resigning and weigh your pros and cons. Make a vision statement that will keep you grounded when you face future challenges.
When Chris quit his full-time job to pursue the independence and freedom of building his own company, he wrote a vision statement to ensure his goals for himself and his family were clear.
“When I quit, I wrote the following vision statement for myself: ‘My vision is to build a life that is independent, free, and flexible. I desire to own my time and pursue the opportunities that get me excited while having the freedom to prioritize family.’ I had been working 45-50 hours per week, mostly in zoom meetings with very little flexibility in my schedule.
In addition to writing down my goals, I made plans for my retirement savings, health insurance and taxes. I also lined up revenue opportunities. By the time I quit, I had two retainer clients and three projects ready to go.
I knew one of the biggest challenges would be cash flow because clients don’t pay invoices on a regular pay cycle. So I was careful to plan so that I could continue paying myself, contributing to my IRA, and funding my health insurance.
- Chris Redrich Founder, ProductManagerJobs.com
When things were hard, Chris would refer back to his goals and vision statement to help remind himself that the sacrifices and challenges of switching from a 9 to 5 to self-employment were worth it.
Make a Budget and Plan Your Savings
Before you resign, be sure to update your budget and calculate how much money you need to pay for basic monthly expenses. It helps to know when your last paycheck will arrive.
In most cases having three to six months’ worth of savings on hand to cover housing expenses, bills and food should be enough. However, make sure you make a budget that is unique to your circumstances.
📝 Tip #2:
Have at least 3 to 6 months of savings in the bank to cover basic expenses.
Many people, like Alex Higson, leave their jobs because they spent years planning, researching, and dreaming about starting their own business.
“About three months ago, I decided to quit my job as a designer at a popular fast-fashion brand. I wanted to start my own fashion blog, Magic of Clothes, and my day job was taking up too much of my time.
However, this wasn’t a rash decision. Since the start of the pandemic, I’d been saving money for an emergency fund for this exact reason. Because I saved up a decent amount of money, I have the liberty to spend time working on a passion project.”
- Alex Higson Founder and editor at MagicOfClothes.com
Have a Plan Before You Resign
When things change at work, and you decide it’s time to leave, it can be tempting to quit right away. If you are independently wealthy or have lots of savings on hand, you might be OK, but having time to plan is a safer strategy for most people.
The amount of notice you give your boss depends on:
- If you already have another job lined up
- How much time you need to save
- How urgent it is for you to leave the work current work environment
If you have been offered another job, make sure to give your current employer as much notice as possible to make the transition easier.
If you don’t have another job lined up but want to resign anyway, give yourself some time to save so that you have cash on hand while you look for another job.
You may also want to give your current employer plenty of notice so that they are willing to provide you with a good recommendation in case you need that.
If your current work environment is hostile or unsafe, you may need to resign quickly. Under these circumstances, you may wish to report the unsafe conditions to a union or the corporation. Depending on your state, you might be eligible for unemployment benefits.
📝 Tip #3:
Decide how and when you will give your boss notice, and make sure that you check your contract before making your resignation official. It helps if you have a new job lined up before giving your notice.
Karen has been working remotely as an Accounting Manager since 2019. When the pandemic hit, it affected their clients, and her hours at the firm were cut. Unfortunately, even as things started to improve for their clients, Karen’s hours never returned to normal, and she felt it was time to move on.
“I really enjoyed my job until the pandemic hit. Some of our clients closed for months, causing all of our hours at my firm to be severely reduced. It got to the point that I was only working a couple of hours each week!
Things got a little better with time as our clients started reopening, but my hours never went back to normal. I needed to find something more stable and predictable, so that’s why I finally decided to resign.
To minimize the impact on my finances, I made sure to land a new job first before formally quitting. Additionally, since both my old and new positions were remote, I waited to make sure the new job was going to work out before I officially left my old job.”
- Karen, www.DebtFreeLab.com
Take On a Side Hustles to Help Cash Flow
If you are resigning to look for a new full-time position, it can be helpful to take on a part-time side hustle while you job search.
Jobs like rideshare driving, dog walking, child care, delivery driving, and more could help you bring in extra funds until you land a new position.
On the other hand, if you resign from your position to start a new business, you might bring in some income from the new business before it is fully launched. Either way, having cash on hand can be a big help until your income returns to normal.
📝 Tip #4:
Taking on a part-time side hustle after you resign can help with your cash flow as you work on finding a new job or building a new business.
“I quit my marketing job at a mid-sized tech firm in June 2021. Fortunately, I had multiple side hustles that helped me make the transition. Forfeiting my W2 job reduced my overall income, but I was pretty burned out juggling two jobs and wanted to explore how much I could grow my business by giving it my full attention. I’ve been self-employed for almost five months now and have no plans of finding a new job any time soon.
My side hustles included two product review sites called finvsfin.com and zenmasterwellness..com.”
- Alex Goldberg, Co-founder of Finvsfin.com
Downsize Your Lifestyle While You Transition
After you resign, you’ll most likely be relying on your savings to meet day-to-day expenses until you have a regular income again. Unless you are already wealthy or have a partner who can fund your current lifestyle, you may need to downsize your spending during the transition.
📝 Tip #5:
During your period of transition, keep your spending down by downsizing as much as possible.
Lena quit her full-time job as a Product Manager in tech in February 2020 and went on a 19-month entrepreneurial journey searching for a better lifestyle.
“The innovation team I was running right before I quit was my dream job, but six months into the job (in December 2019), the company’s executive leadership changed and cut my team. They offered to absorb me into the rest of the organization, but I’d caught the entrepreneurial bug while innovating new products in my job and decided to take it as a sign to leave.”
- Lena Sesardic, Product Owner at Aviso Wealth
Lena highly recommends making some temporary sacrifices so you can get through the more challenging parts of resigning from your job. This advice is especially true for those who are leaving to start a business. Overspending, in the beginning, could lead to burnout.
“Sacrifice your lifestyle, at least in the beginning, less going out, less shopping, fewer coffees. It helps if you can find pleasure in cooking at home and living as a minimalist.
To succeed, you need to keep your finances in check. Otherwise, you may have to tap out sooner than you want. Sometimes, success comes later and slower than you expect because of unforeseen roadblocks and the pivoting you need to do until you get a new full-time job or find success as a business owner.
Eventually, when you do make it on your own without full-time work, you can reward yourself by spending on luxurious things and experiences.”
- Lena Sesardic, Product Owner at Aviso Wealth
Why are Americans quitting en masse?
As economists examine the resignation trend, there can be little doubt that the pandemic had some impact. However, the great resignation started, at least in part, before the pandemic began and was merely accelerated by the global event.
For several years, the American workforce has demanded more flexibility, better benefits, and greater pay.
- Remote work flexibility
- Better pay
- Better benefits
- More fulfilling roles
American Labor: What The Data Says
- 4.4 million people quit their jobs in September (about 3% of the nation’s workforce.) According to The Labor Department, that record number comes on the heels of several consecutive months of record-breaking resignations.
- Employees between 30 and 45 years old have had the greatest increase in resignation rates, with an average increase of more than 20% between 2020 and 2021.
- Year over year, resignations increased in both the tech and healthcare industries.
- 73% of 380 employers in North America were having difficulty attracting employees – a number three times greater than the previous year. 70% expect this difficulty to persist into 2022.
- 79% of employees said they would be more loyal to a business that offered more flexibility, according to a FlexJobs survey.
- 65% of workers report that they feel more productive when not in the office.
- 85% of businesses have reported that they have been more productive since going remote.
Companies that resisted remote work because they feared it impeded productivity no longer have that excuse! Remote workers have proved that they are happier and more productive when they have flexibility in the workday.
As The Great Resignation Continues, employees will continue to resign and search for jobs where remote and flexible work is celebrated. Employers who want to attract new employees must find new ways to do so.