Most financial experts say that you must have around 3-6 months’ worth of your monthly expenses saved in your bank account before considering a resignation from the job you now have. For those who are getting confused as to how much they need to have at their disposal before quitting a job, here are a few points to consider;
1. Are you the breadwinner of the family?
If you’re the one your family depends on for a living, then you should definitely set aside a large portion of your wages in order to make sure that you and your family will have something to live on while you are still job hunting or transitioning to your next source of income.
As the breadwinner, all financial burdens will fall on your shoulders. Once you resign from your job, you’ll have even more responsibilities, ergo, the more you save, the easier it will be for you in the coming weeks or months. One more thing to think about is how long you’ll be able to recuperate in the event that your new business doesn’t pan out as expected or if you’re unable to land a new job quickly.
2. Do you have a bare-bones budget?
In other terms, have you determined the absolute minimum amount of money that you need to float you for a month (for bills payment, food, allowance, transportation, etc.)? You’ll need to know this so that in case something happens (i.e. You suddenly lost your money, or you have a low salary for the month, or if you get sick)you’ll feel comfortable in the fact that if you’ve reached that certain amount, it’s going to be enough to get you living for another month. Below are the things to consider in creating your bare bones budget:
b. Car expenses/loans
c. Utilities (gas, electricity, water)
d. Internet and cellphones
e. Food, household items and groceries
f. Insurance (medical)
When you create a base minimum of your monthly expenses, multiply that figure to at least three times to give yourself enough leeway to recover from any untoward circumstances that may happen.
3. Are you mentally and physically prepared to handle or face reality?
In a perfect world, you’ll want to give yourself enough cushion of at least a year’s worth of expenses. However, life almost always happens in ways you don’t expect or plan. You can’t always predict or plan for everything, and you’ll need the guts to make do with what you have. The road to success is not often as smooth as you like, but the more important lesson is to never quit and have faith that everything will work out in the end.
4. So really, how much money do you need saved before leaving your job?
Finances are not a one-size fits all type of thing, so the answer to this question will depend what you and your entire family need. But a good rule to follow is having anywhere from 3 to 8 months’ of savings to cover your entire expenses while you’re figuring out your next steps regarding your new business venture or while you’re waiting for a new job.