To leave or to stay? Resigning from your job is probably on your mind for weeks, months, or even years now, and you can’t wait to try something new in your career.
You have to think it through because it’s a life-changing decision. Not only will you make a major career shift, but your finances will also take a different direction, depending on your next move. So as early as now, you should know how to prepare your finances before quitting your job.
A recent study found a 176% increase in voluntary resignation across all industries in the Philippines even during the pandemic.[1] The signs of the “Great Resignation” phenomenon are upon us this year, but that doesn’t mean you should immediately join the bandwagon.
How to Prepare Your Finances Before Quitting Your Job
So that you won’t end up struggling with money, feeling stressed, and regretting your decision, you have to be financially prepared to leave your job. Here are five practical tips to help get your finances in order before your resignation.
1. Have a New Source of Income Lined Up
Do you have a new stable job waiting for you as soon as you leave your employer? Most companies in the Philippines require their employees to give a 30-day notice for resignation. But one month isn’t enough time to find a job that’s a good fit for you. It could take three months or longer.
While you’re still employed, start looking for a new job at least three to six months before you resign. Being unemployed or having a long employment gap can hurt your chances of getting hired.
If you’re resigning to become a full-time entrepreneur, keep on growing your business and quit your full-time job only when you have steady cash flow and a solid customer base.
Thinking of taking on freelance gigs while looking for a new job? It’s too risky to start looking for clients only after your last day at work. Landing a freelance job nowadays can take at least one month. The wisest thing to do when you’re planning to resign is to start finding clients while you still have a day job. Of course, just don’t do it during work hours.
Read more:
- Legit Online Job Sites to Help You Look for Work During the Pandemic
- Top Online Jobs in the Philippines You Should Consider
2. Save at Least 3 to 6 Month’s Worth of Living Expenses
If you can’t wait to resign, you can choose not to work for some time after leaving your job. You can take that well-deserved rest or even travel to unwind, especially if you’re burned out. But you can safely do these things only if you have enough savings to get you through until you’re earning again.
Yes, your employer will issue your back pay, but you’ll have to wait for at least one month. Not to mention that some companies hold their resigned employees’ last salary, which is usually included in the back pay upon clearance from HR. This means you might not receive your final pay in your last month of employment when you resign.
How much money do I need to quit my job, you might ask. That depends on how much money you need to survive while you’re not earning income. While you still have a job, save at least three to six months’ worth of your living expenses and deposit it in a savings account or checking account where you can easily access money when you need it.
How to prepare your finances before quitting your job if you want to resign soon? The importance of having an emergency fund cannot be stressed enough. Your emergency fund will serve as your safety net or financial buffer during the weeks or months when you’re fresh from resignation and unemployed.
Aside from having sufficient savings, cutting down your expenses will ease your finances while you’re between jobs.
3. Hold Off Any Large Purchase
Planning to buy a house or car this year? Do you have any other major expenses coming up? Delay your resignation until you’ve found a job or sustained a business that can cover your monthly housing loan or auto loan repayments.
Leaving your job can affect your chance of getting approved for bank loans. The Pag-IBIG Fund, SSS, banks, and other lenders in the Philippines require payslips and income tax returns to prove that you can repay your loan.
Sticking with your present employer may be the only way to have proof of stable income when you apply for a loan or a credit card. You may want to reconsider turning in your resignation letter.
Otherwise, if you’ve already made up your mind about resigning, wait until you get a stable job before you start your home or car purchase.
4. Plan the Timing of Your Resignation
At work and in life, timing is everything. If you’re determined to resign, make sure you have a definite timeline for your exit and the timing is right. Consider how leaving your job at a certain time of the year will affect your income and spending.
For example, if you’re a parent or the sole provider in the family, resigning a few months before schools open can ruin your budget, unless you’ve prepared way ahead for your child’s tuition.
Also, consider postponing your resignation if your company will pay your bonus and unused leave credits in a few months. If you’re already entitled to receive a lump-sum early retirement package from your employer this year, you might want to wait a bit.
5. Talk to Your Family About Your Plan
Your resignation may also affect your household budget and spending, especially if you’re the breadwinner. Can your family adjust their lifestyle with possible unemployment or decreased income?
Sit down with your spouse, children, parents, or siblings—they need to know your plans and be involved in any cost-cutting measures and budget adjustments your family will take.
What to Do Before Quitting Your Job: Consider Your Salary vs Your Reason to Resign
Getting Better Compensation
Salary is the top consideration for 75% of Filipino employees to stay in their workplace, found the 2022 State of HR Report by Sprout Solutions.[2]
As this study shows, money still matters in a career decision. Of course, you want to be where the grass is greener—it can be the company you're working for, another employer with a better offer, your start-up business, or your budding freelancing career.
Is your current paycheck worth giving up? Think about it versus your reason for quitting. Talk to your manager and try to work together to resolve your issues at work. You might realize you have better reasons to stay. But if it doesn't work out, then it's time to call it quits.
Of course, one's salary isn't always the prime consideration. Certain situations in the workplace make resignation necessary and urgent, like sexual harassment and toxic work culture that can drain a person emotionally and cause health problems.
Letting Go of Company Benefits and Perks
Consider also the perks and benefits you're enjoying from your employer that you might not get elsewhere: HMO, life insurance, the company-issued car or smartphone, numerous paid leaves, non-taxable allowances, travel opportunities, retirement package, etc.
Can you live without them? Which of these benefits are important to you and which ones are you willing to forego?
If you want to resign to become self-employed, do you already have a health card and life insurance that you or your family can use during a medical emergency?
Final Thoughts
Once you have a carefully laid-out plan on how to prepare your finances before quitting your job, you’ll be more confident in making that all-important decision. Resignation—whatever your reason is—can have a big impact on your finances. So make sure they’re in order before you leave the stability of your current job.
This article also appeared in The Manila Times.
Sources:
- [1] More Pinoys quit jobs even in midst of pandemic – study (Manila Bulletin, 2022)
- [2] Great resignation ‘in full swing’ as Filipinos find better work online (Rappler, 2022)
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