What Should I Do Before Quitting My Job? 15 Things To Consider

Green Onion Farmer In HawaiiWhether you are a millennial with ADD or a parent going through a mid-life crisis, it’s natural to want to do something new after a while. I began to itch after 10 years with one company myself.

Thanks to a change in loyalty attitudes, it’s become common to chase a new job. No longer do we stay at one firm for decades and retire at the age of 65 with a pension. Only around 10% of private companies offer pensions, leaving us to fend for our own retirement with woefully inadequate 401Ks and IRAs. With a smaller pot at the end of the rainbow, we’re more inclined to search for better opportunities.

Thanks to the internet, we can easily see what else is out there. The internet has also allowed us to work remotely for someone or for ourselves. If everybody had the skills to harness the internet to make a sustainable living, I’m pretty sure there would be a mass exodus from the traditional workplace!

It’s easy to get starry eyed and think the grass is always greener on the other side. My intent for this article is to help you make sure you don’t take the leap of faith and land on a bunch of jagged rocks. I’ve seen way too many people online and offline detonate their lives because they did not look down below.

15 THINGS TO CONSIDER BEFORE QUITTING YOUR JOB

1) What are you really unhappy about? You might be complaining about your work hours, or your mindless work, but perhaps those are only excuses to what’s really bothering you. Lack of recognition or no correlation with reward and effort are the most common reasons people want to leave their jobs. If you do not feel you are being treated fairly, you should have a heart-to-heart with your manager to discuss your concerns. Your manager can’t read your mind. Maybe you’re feeling a little envious of your friend for being financially free so early and you want to make the move as well. Envy doesn’t lead to any good.

2) How large is your safety net? The higher the cliff you jump off, the greater the chance you will die upon landing. If you have a high paying job with kids and a mortgage, you better have a massive nut to take care of you just in case your new occupation fails. I recommend everybody have at least 12 months worth of living expenses before quitting. That one year of savings should be in a liquid account such as savings, CDs, or your brokerage account. Consider an umbrella policy and life insurance to protect your family. Insurance becomes that much more valuable once you decide to make a change.

3) Calculate your monthly cash burn rate. You can’t figure out how big of a safety net to accumulate if you don’t have a reasonable assessment of your monthly cash burn rate. Calculate the average over the past 12-24 months to get a good idea of the swings. Use the average of your three highest monthly burns and multiply by 12-24X to get what you really need. It’s much better to be safe than sorry.

4) Calculate your passive income streams. You might be surprised at home much side income you are actually generating in addition to your day job income. All those dividend and interest payments add up, for example. It’s hard to know how much you actually earn from dividends and interest because most people elect to have the proceeds reinvested in their portfolios or CDs. There is no penalty for electing to have such payments transferred to another account for use. Obviously, if your passive income streams can fully fund your highest monthly burns forever, you are set for life. Just make sure you don’t start having a lot more wants.

5) List out all the things you plan to do. There might be only one thing you want to do as soon as you quit your job, but it’s best to list out all the things you can and may need to do. Nothing seldom goes according to plan. You need a backup for your backup. When I quit my job, I wanted to focus my attention full-time on my online endeavors. In the meantime, I also wrote about my desires to do a PhD, work for a competitor, or join a startup. There are exogenous variables out of your control which can quickly change your plans.

6) Think about others. It’s easier to quit your job if you are single. At some point, it stops becoming about you, but more about your children or spouse. Once you start considering the lives of others into your job quitting equation, you become more vigilant in making sure all your files are in order.

7) Put it all in a spreadsheet. Put your passive income streams, cash burn amounts, and entire networth into a spreadsheet. Play around with the numbers, always earning on the side of caution. By putting everything down on paper, you get a better idea of where the holes are. Work on optimizing the deficiencies until you are satisfied before quitting your job.

8) Check out the charts. The following chart is my recommended savings rate and amount one should have at various stages of their working lives. Of course, the amounts depend on the lifestyle you want to live. Use my chart and other charts as guidelines on where you want to be. In the end, the choice is yours.

9) Will a sabbatical do the trick? If you are suffering from burnout, consider taking a one to three month long sabbatical to recharge. There should be a sabbatical policy for those who’ve spent at least three to five years at their jobs. The sabbatical will provide you a good idea of what you can do with your free-time, while practicing to live on less.

10) How open is the Bank of Mom and Dad? You may be lucky to have parents who welcome you with open arms as a 35 year old male, or you might have a dad who will call you a deadbeat loser for quitting a job and failing. Whatever the case, you must carefully assess the worst case scenario of living off your parents in their golden years. If they have multiple properties and are financially secure, excellent. If not, perhaps you should consider trying to help out your parents more instead of being more of a burden.

11) Are you willing to work at McDonald’s? There are over three million jobs vacant in America despite a 7.8% unemployment rate because of a skill mismatch and too much pride. If everything goes to hell, are you willing to take a job that you think is beneath you to survive? Are you ready to be discovered by old co-workers you once hated who now see you working a minimum wage job?

12) What time of year is it? If it’s October, November, or December, you are taking a bigger risk by quitting than during the other months of the year. The first reason is you’ve given the company the majority of your time with the minimum possible compensation since you are walking away from a potential bonus or promotion. The second reason why it’s risky to quit in the 4th quarter without another offer is because very few companies hire in the 4th quarter! Budgets are spent and hiring freezes are on. What manager wants to blow their full year budget and hurt their bonuses with a new hire who will provide the least return during the year?

13) Do you have something else lined up? The best scenario is having something lined up as soon as you quit. I call this double or triple dipping. Hopefully, you’ve signed an iron clad contract for your new employer to hire you once you do quit, otherwise, you could be screwed. Have an attorney look over your contract and try and see if you can receive a signing bonus for your commitment. If you don’t have something lined up, start cracking.

14) Take your time to quit. Some of the worst decisions happen because they were not well thought out. I cannot tell you how many times people have kept their job frustrations bottle up inside only to announce one day they quit. They burn bridges, get no severance, get no health insurance, and don’t even get the opportunity to collect $1,800-$2,000 a month in unemployment insurance paid for by the state and company for at least 26 weeks. My book provides a game plan for people who are willing to spend three to six months learning their rights, building the right relationships, and ultimately negotiating a life saving severance package.

15) Talk to as many people who’ve quit as possible. The only way to know something without having experienced it yourself is by asking someone else who has experienced what you plan on going through. Read posts such as:

What Does It Feel Like To Be Unemployed?

A Day Job Is So Much Easier Than Entrepreneurship

Wealth Is An Illusion Of Happiness

The Dark Side Of Early Retirement

How Does It Feel Like To Be Financially Independent?

Quit Your Job And Die Alone

The goal is to get a good idea of what you’re getting yourself into.

QUITTING IS THE EASY WAY OUT

Although quitting your job can be terrifying, quitting is actually quit easy compared to finding something awesome new to do that can also provide a sustainable income. Many of my friends with Masters degrees have spent over six months looking for better opportunities with none to be found. Don’t be overconfident in your future.

If you can just take the time to plan your departure through the above steps, I promise you will be much richer, much happier, and way less stressed. I never would have imagined engineering my layoff could be so lucrative. But through research and a month and half long negotiation process, it’s incredible to have a long runway to pursue my online endeavors with little financial stress. Plan and plan some more!

Photo: On the farm in Hawaii, SD.

Regards,

Sam

How To Make Money Quitting Your Job

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. NotrustFund says

    This is such a great list. I especially like number one, if you can’t fingered out what you don’t like about your current job it’s very hard to fix it either at your current job or your next job. There is always a sense that the grass is greener but every job has it’s downsides.

    Along this vein and combined with #15, I also find it helpful to talk to people in other jobs. It may help you appreciate what you have or help you get closer to your next gig.

  2. Eddie says

    Love your list, and particularly #1. However, what if you had a 1-1 with your boss, who also happens to be the president, and expressed your feelings, yet nothing has been done. Does one wait around? Move on? and more importantly what signal might this send to the employee?

    Looking forward to your thoughts.

    • Financial Samurai says

      Eddie, if you’re already had the heart to heart, and six months has passed with no change whatsoever, then: 1) Ask again, 2) Get busy planning your exit which includes looking for another job, 3) Ask yourself how much longer you can take and stick with it.

      It’s hard for me to give you comprehensive advice without knowing more details.

  3. Debt Freedom Plan says

    I quit my job to pursue ‘other opportunities’ in 2001. At the time I was making over $500 a day and due to some poor life choices – spent it all. I’m now in debt and am looking for a day job to reduce some debt. If there’s one thing I can recommend to those looking to quit, be sure you’ve got enough to live on because you never know what the future may hold.

    • Financial Samurai says

      $500 a day is a nice chunk of change! What field of business? That’s about the same as my 3 year goal of working 4hrs a day/ making 200k a year.

      I can’t tell you how many young bucks who borrow from their 401k, have good stock market returns for a year, borrow to borrow more money, and spend aggressively think how predictable life will be. Things change all the time.

  4. My Multiple Incomes says

    Great list you have here! It is really necessary to figure out why you want to leave your job. Oftentimes, we get so burnt out that we do not really see how important our job is to keep us financially afloat, not to mention it is not very easy to find another one in this difficult time and having a list like the one you have will really point you out to the right track. It’s just a matter of choosing between taking a short break and leaving your job for good.

  5. Youthfulinvestor says

    I’m really glad I read this list actually because I am gearing up for a major job change now and had hardly given consideration to how the time of year affects the chance at employment. I had planned on leaving this one at a given date and then moving down to the region I am looking to start my career. However I may wait now until I have a solid offer before quitting this job.

  6. Mike says

    Quitting or walking off the job should be a last resort and should be done strategically, neven impulsively. I’ve worked in call centers with hundreds of people so you see all kinds of scenarios play out each month and there have been plenty of people who walk out on a whim because the boss or a co-worker agitated them and they live to regret it when they find out it is still a vicious jungle out there in the job search world.

      • Mike says

        All here in U.S. and I’ve worked I’ve pretty much done it all when it comes to call centers including running my own company. But in each center I eventually met someone who thought that walking off the job or quitting without a plan would somehow dramatically prove their “point” and then when you catch up with these people later on they are typically regretting their action – most commonly for financial reasons.

      • Miss T says

        I work in a call center and it will be now five years. I have a Bachelors and I am in my second month sabbatical. I am trying to pursue real estate and have several clients lined up; but I’m very concerned if I should return to my job or burn the bridge. I do not miss the call center and the stress. I only miss my co-workers. I am so undecided and never been or thought would be in this situation when I set to get an education.

  7. FI Fighter says

    Awesome list here. You’re right, the grass isn’t always greener on the other side, so make sure you have everything figured out before you turn in your two weeks.

    That’s interesting, and I’ve also noticed that hiring comes to a standstill in the Winter months. I’ve always been more successful going after a new job in the Spring.

    In this day and age, I agree that not many people stick around at the same place for too long anymore. But for good reason too. Most companies won’t pay you your real worth until they see that someone else is willing to. If you have the right skills, you would be a fool to remain complacent in the same place your entire your career. Give any company a chance to take advantage of you, and they will. Luckily, with social networking, and LinkedIn, it’s becoming increasingly easy to shop around.

  8. TB at BlueCollarWorkman says

    There’s a few great ones in here. Like #11 – I always wondered about that. I see wanted signs for all sorts of “low end” jobs like McDs, Walmart and stuff. And so when I see people who are unemployed I think, “WTF? There ARE jobs, just too proud or what?” I don’t think there’s a job in the world I’m too proud to take. If I’m out of work, I’d work anywwhere, even if it’s not enough to make ends meet, it’s more than zero.

    #6 is good too, thinking about others. WHen I got married and had my girls, my whole worldview freaking changed. You definitley have to consider staying put because you need to feed and clothe them! Of course staying in a job that makes you miserable and sucks coudl also send a message to your kids that its okay to be miserable. Either way, you do have to think about others.

    • Financial Samurai says

      With potentially no more Fed unemployment benefits in 2013, working at McDonald’s is a real possibility for millions who logically would rather spend time finding a better job collecting UB.

      I think Fed UB will be extended though. Let’s just not be too proud to do whatever we can to survive on our own after a while yeah?

  9. Untemplater says

    I think a lot of people still have the misconception that it’s easy to quit your job and find a new and better job quickly. I would never quit without a offer letter in hand for my next move unless I was ready to retire. There are so many things that we often take for granted from our current employers, esp. insurance benefits. Very thorough list and great advice Sam!

  10. krantcents says

    The real message is that one should do some planning before they quit! #5 is the most important because it makes you plan what you are going to do. Writing it out should make you realize if the ideas are sound or not. The more you can find out about what you want to do, the better off you will be.

  11. Pauline says

    I like the idea of a sabbatical, seeing your condition from the outside can bring you a new vision. And you can also check what you would do with all that free time, many retirees get depressed having nothing to do all day.

  12. Shilpan says

    I like your idea to take sabbatical. I took 3 years sabbatical before. That period provided me to introspect my life and the progress that I had made at that point. It also provided me to map out my life going forward. I believe that everyone should take a semi-retirement at some point before mid-life.

    • Rich In The Heart says

      Wow, 3 year sabbatical. Wouldn’t one call that early retirement testing instead?
      Too late for me relative to the mid-life suggestion. I hit that this year (well, as long as I live about as old as one of my grandmothers did before passing).

  13. Kim@Eyesonthedollar says

    I’ve been a my own boss by owning my practice for over 10 years, and I’m selling it all in a few weeks. I couldn’t be happier, but it toook about a year of planning and another year of negotiation. I have three contract jobs lined up, but, like you said, anything can happen, so before it all went into motion, my husband and I talked about worst case scenerio and what we would be willing to do. We’ve set up some passive income and paid off debt, but if that isn’t enough, we are willing to sell our house and move if we had to. I would also not feel shameful about taking any sort of job if I couldn’t work in my current occupation. Here’s to hoping it all goes smoothly!

  14. Eliza from Happy Simple Living says

    This is such a good, practical article. Who among us hasn’t daydreamed of simply up and quitting when we get burnt out or frustrated? Thanks for your advice to consider this option thoughtfully and plan carefully. Also, your suggestion to explore a sabbatical is brilliant!

    One thing I’ll add is that starting your “freedom account” now so you can quit someday is SO worth it. I left my stable job ten years ago this month, and although not everything always went as smoothly as I’d planned, I’ve never regretted the decision. Before I took the leap, I followed much of the advice in your article: I put money aside, lined up contract work, reduced expenses and paid off my car. That made a big difference!

    • Financial Samurai says

      Glad you enjoyed the post Eliza. A Freedom account is a great idea! It’s fun to have goals with saving money, and what a great goal this one is to have. I guess my 401K, CDs, and other investments are my freedom accounts. Congrats on 10 years of freedom!

  15. average guy says

    >>Photo: On the farm in Hawaii, SD.

    Are you pulling one over on us here, Sam? There is no place in South Dakota named Hawaii, well at least there is no town listed with that name that has a zip code.

    Set the record straight and tell us what the place is and where it is!

  16. Dominique Brown says

    Quitting your job is easy. The hard part is finding a new job that would cater to all your demands. I have quite a few friends who quit their job to seek “greener pastures”, but end up regretting their actions. I definitely suggest that you should take your time to quit and put it all on a spreadsheet to know your current financial status. You should also take your family into consideration when quitting your job as they would definitely be affected should you not find a new job in the following weeks after resigning. Last but not least… Have a plan!

  17. American Debt Project says

    I was ready for a new job back in August, but I knew it was going to be tough to make a move before Christmas. I ended up running into someone at a conference at the end of September and they asked me to send over my resume for a position I knew about but wasn’t sure I wanted. They told me they were willing to “elevate it” for the right person. 3 interviews later, I ended up getting hired over someone who has a master’s and making more than someone who works there now with a master’s! It felt good to leave a job I had outgrown to go right into a new job I’m pumped about!

  18. Aloysa @ My Broken Coin says

    The cash burn rate point got me thinking. The cash burn rate can at one range while you are working and have the stability of your paycheck vs when you are not working anymore. A lot of things lose their meaning when you are faced with a limited budget. The question that I have is this: how to quit your job but still be able to maintain your current lifestyle? I cannot come up with a good answer only with something silly like “become rich and famous.” This option is not feasible for most of us. :)

    • Financial Samurai says

      As someone who no longer goes to work, I can answer your question easily. Develop alternative income streams that cover all your living expenses. I spent 13 years investing my savings so it can produce a cash flow of around $70,000-$80,000 a year. That is enough for me as an individual to live off in San Francisco. With this passive income stream, I’m now actively working on my online income stream as a bonus. Saving money is not enough b/c the interest savings rates are so low. The highest I’ve found is through CIT Bank at 1.05%.

      This blog as a WRITER has helped me find the best mortgage rates, and look into things like P2P lending to boost my returns after my CDs come due. Hopefully as a reader, it provides as much benefit as well.

      You’ll also find you don’t need much to be happy too. We adapt to all sorts of circumstances!

  19. Carol-Lynn says

    Thanks for this. I’ve been going through the dilemma of whether I should quit my job since December. I never wanted this job but had to take it. I have been trying to make myself like it (i.e. #1 – trying to solve what am I really unhappy about) but really have only been sticking with it ’til I had something else lined up. Problem is, that I get so low because of this job that the energy isn’t there to work on something else. I know I can survive financially unemployment, but it is just surviving.

  20. Anonymous says

    Hi there. I’m not too happy about my current job (I work in fast food at minimum wage). Will your book be applicable for me?

  21. Sales Rep says

    Great website, SD. I just stumbled across it this evening and look forward to discovering all that you have generously posted here.

    I have a question for you regarding unemployment – I’m 43 years and have never been unemployed, currently working in medical sales. Income is highly variable depending on production, but I’ve never known a sales rep to be laid off – they’re typically fired if they fail to achieve quota. Is it possible to draw unemployment if you’ve been at a company 3-5 years in sales and get let go?

    Thank you.

    Sales Rep

      • Sales Rep says

        Thank you for the info and also for such a quick reply. I’m doing well as of now but I’ve always been curious as to whether I would be eligible if I got fired.

        I look forward to learning more from your site.

        Best Regards,
        Sales Rep

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