Thinking of Quitting Your Job? Take These 4 Financial Steps First

If reports about the Great Resignation have you thinking about quitting your job, you’re not alone. More people than ever are dreaming about finding a new job, starting a business or pursuing a freelance career full-time. According to the Society for Human Resource Management, nearly 4 million U.S. workers on average quit their jobs each month.

Whether you’re dealing with burnout or on the hunt for higher pay, taking the time to plan financially before you make any big career decisions is the best way to set yourself up for a successful transition.

Financial steps to take before quitting your job

1. Check your emergency fund

If you’re leaving your job before lining up a new one or moving to self-employment, revisit your emergency fund and make sure you’ve saved enough to cover your expenses while you’re transitioning. Generally, you’ll want to have saved six to 12 months’ worth of expenses, which should be enough to see you through a modest period of unemployment. If you don’t have at least six months saved yet, you may want to reconsider your timing.

2. Budget for your health insurance

If you’re like most Americans, you probably receive health insurance through your employer. Leaving your job means that you’ll need to estimate the cost of your other health care options and account for this in your budget.

If you’re unable to join a spouse’s health care plan, you may be able to maintain your existing coverage thanks to the Consolidated Omnibus Budget Reconciliation Act (COBRA), a federal law that allows you to continue with your current employer’s plan after you leave. But this option can be costly, as you’ll now be responsible for the full premium amount that your employer used to pay — an average of more than $600 a month for individual coverage and more than $1,700 a month for family coverage.

If you’re looking for health insurance through the marketplace via Healthcare.gov or one of the state-based sites, make sure to check if you’re eligible for tax credits or subsidized coverage.

3. Check your life and disability coverage

If you only have access to life insurance or disability coverage through your employer via a group plan, you’ll need a plan for coverage once you leave.

Sometimes these plans are portable, meaning you can take them with you after you leave. However, this often isn't the case, and even if it is, you might find the premiums are higher than you’re able to pay. This would be a good time to look into private coverage.

If you already have a new job, find out what kind of insurance coverage your new employer provides in its benefits package. Is the group coverage truly enough to protect your family’s finances? It may still be worth looking into personal term life or whole life insurance to make sure your family would be able to cover both present and future costs if something were to happen to you.

4. Consider your retirement savings

If you have an employer-sponsored retirement account such as a 401(k), 403(b) or 457(b), you’ll want to weigh the impact of leaving your job on your retirement savings.

For example, if your employer offers a company match or profit-sharing plan, have those contributions fully vested? Or would the timing of your resignation require you to forfeit all (or a portion) of the match? If you aren’t fully vested, would you consider staying with your employer until you are?

If you do resign, you might be able to leave your account with your former employer but you might also choose to roll it over into your new employer’s plan once you’re eligible to participate. If you’re leaving your current job to become self-employed (or you simply want more control over your investment options), you may also decide to pursue an IRA rollover.

If you’re unsure about whether you’re truly ready to quit your job, or you need some help thinking through some of the considerations mentioned above, a financial advisor can help you create a plan to get you where you want to be.