If you want to quit your job in the near future, then congrats to you! You’re about to take a big step in life. This is a step that many contemplate but never end up going all the way with it. Hopefully you’ve thought about this decision and all of the details that surround it. You also hopefully contacted your close friends and family members to gather their thoughts on this decision.
Before you do quit your job you need to do one more important thing. What’s the most important step when it comes to quitting a job? You need to save up some money. As exciting as it is to quit a job, I believe that you need to be realistic about it.
You need to save some money before you quit your job for the following reasons:
If you have any debt (student loans, home, auto) you’re still going to have to make your debt payments. If you can’t make your debt payments then you’ll get yourself into some serious trouble. You might get forced into bankruptcy or you might get stuck with paying more interest on your debt. As you plan on quitting your job you need to take your current debt into consideration.
Now that you plan on quitting your job, you might have to cut back on some of your expenses. The expenses that are remaining are going to have to be paid for somehow. You need to account for current expenses and any new potential expenses that might come into the picture.
If you don’t have any concrete plans for work then you’re definitely going to experience some lean times. If you plan on starting your own business, you’ll also suffer with lean times. There’s nothing wrong with business cycles, it’s just a matter of being able to handle them. Having money saved up will help you deal with the lean times in your post-9-to-5-life.
Anxiety will kick in at some point and you’ll feel like you’re going to be homeless because you have no money. It happens to me all of the time. I get hit with a new expense or I spend money on my business and I feel like I’m going to fail and be on the streets. Call it an emergency fund or an anxiety fund, but it helps to have some extra money set aside for life.
As you can tell I don’t believe in cheerleading and throwing out “feel good” advice about quitting your job. I think that if you want to leave your current work that it can be the best decision of your life. You just need to plan for this move financially. If you don’t plan for this big move you’re going to end up losing your mind trying to deal with the harsh realities of self-employment.
Alright so you know why you need to save up some money before you leave your current job. Now let’s look at the mega question here– What’s the right number? How much money should I save before I quit my job?
There’s many arbitrary numbers that have been thrown out there. It all really depends on the amount that you’ll be comfortable with and what your plans are. I don’t want to beat around the bush so I’ll give a straight up answer. I think that you should have three months worth of money needed saved up before you quit your job.
How much money is this? Add up your expenses (debt, fixed, variable) for one month and multiply it by 3.
Why three months? At this point you’ll realize if the self-employed life is for you or if you thrive better in a traditional workplace environment. You’ll also be able to test out your business ideas, try to see how productive you really are during the day, and determine if you miss your co-workers. When your savings dry up after three months you can decide what the next step will be for you.
Have you quit your job recently? What would you recommend someone does before quitting their job?