Many people have fantasies about quitting their jobs. The latest nasty email from your boss or co-worker or just getting sick and tired of doing the same old, same old day after day can lead many people to think about ways they’d leave—the more dramatic, the better!
While quitting your job and walking out in a blaze of glory might seem satisfying at the moment, it’s crucial that if you are going to quit your job, you have developed a plan to make sure your financial bases are covered and that you leave on your terms, not anyone else’s.
Rich & REGULAR with Kiersten and Julien Saunders is no longer releasing new episodes on the SUCCESS Podcast Network, but you can still listen to the full conversation below.
Think strategically
Unless you win the lottery or are in line to inherit a lot of money, you’ll need to think strategically about any financial plans you make before quitting a job. If you’re not quite financially ready to leave the workforce but can’t handle staying in your current position, spend some time searching for a new job first.
If you’ve been working on upskilling and taking advantage of employer-offered education, now might be a great time to find a better job with a higher salary, thanks to the Great Resignation.
Even if you find the perfect new position, it’s still important to focus on your long-term goals and make a plan for leaving the workforce altogether. You don’t necessarily need to retire from work, but focusing on how you would live your life if you weren’t subject to a boss dictating your time can help you determine what’s essential in your life and what you want to make a priority.
Make a plan
Instead of just fantasizing about leaving your current job, start taking small steps to help you get to where you ultimately want to be. Brainstorm ideas about how you would spend your time if money and security weren’t an issue. While lying on a beach for days is an excellent idea, you’ll probably get bored of doing only that after a couple of weeks and want to do something to occupy at least some of your time.
If you’ve always wanted to write a book, start to develop structure around what your writing life would look like. If you’ve never really liked the idea of full retirement, consider what you’d be interested in doing as a second-act career.
Developing a spending plan
Once you know how you’ll spend some of your free time, start to include some budget numbers in your plans. This will become your retirement spending plan and help you determine the steps you need to take to make your plans a reality. Think about how much money you’ll need to maintain your current standard of living or any changes you might make, like downsizing or moving to a cheaper area.
How old you are, any children you have and how old they are, and if you have credit card debt, student loans or medical debt, as well as costs for insurance, utilities and food should all factor into your list and will determine how much you need to spend each month. Include a buffer for inflation, rising medical and prescription costs and unexpected emergencies.
If you plan to work in retirement, realistically project how much income you’ll bring in and how much you want to work compared to your desired amount of leisure time. You may find that with a nice savings cushion in a brokerage or other investment account, some freelance work and a moderate budget, you may be closer to your job-free life than you thought. If you want total financial independence or have more to spend in retirement than you do now, your plan may take longer.
What assets do you have?
When you have a rough idea of how much you’ll realistically need to spend each month, develop a separate list of your assets. Include balances of your non-retirement accounts and other assets. Consider investing in real estate or growing a business that will provide income for you without having to work a traditional nine to five job.
Remember that most retirement accounts like 401(k)s or Roth IRAs have penalties if you withdraw money before age 59 ½. While those accounts are essential, and you should continue contributing to them to have security in your later years, they likely shouldn’t factor into your shorter-term asset planning.
Make small steps to achieve your goals
Once you have a list of your projected spending and assets, compare the two for the difference. If you see a big gap between your proposed spending plan and the available monthly income, you’ll need to work to bring them closer together.
Develop a list of small steps that will help you bridge the two. That might be cutting some wants from your spending plan, considering a way to bring in more passive income, working for a few more years to build up your savings account or all of the above.
Remember to focus on consistency over significant wins. While you probably won’t ever become a millionaire by skipping $5 coffees, you can improve your financial health by developing a spending and saving strategy and sticking to it over time.
Final thoughts
Choosing to stop playing someone else’s employment game can be scary and intimidating. The sooner you develop a plan to take care of yourself, instead of relying on an employer to do it for you, the closer you are to making your own decisions that are right for you and not based on someone else’s bottom line.
