Let’s say you’re so sick of your job that you’re ready to quit without another one lined up. To survive, you’ll need some money to cover expenses, of course — but how much is that exactly?
When you hand in that resignation, it’s important to remember that you’ll need quite a bit of cash saved up beforehand. That’s why quitting without another source of income isn’t recommended, but hey — sometimes it happens. Here’s a look at how much it will cost.
How much money you’ll need to quit
There’s no universally agreed-upon number, but personal finance professionals commonly recommend six to twelve months worth of expenses, in addition to your emergency fund. If you’re a skilled worker, you might be better off with twelve months’ worth of expenses, however, as the hiring process can often take months rather than weeks for some professions.
Of course, six to twelve months of expenses is a lot of money, but that’s because you likely won’t qualify for unemployment benefits if you quit voluntarily, unless it’s for a “good cause” like unsafe working conditions. Consider reducing your expenses to a bare minimum, too — it’s a lot easier to quit if you can save money somehow, like moving in with your parents or finding roommates, for example.
Watch out for hidden costs
To know how much you’ll need to save, you’ll need to itemize you monthly expenses like rent, food, and other bills. Don’t forget that you’ll need to pay something extra for health (and possibly life) insurance if you don’t already.
It’s also helpful to look into lowering your recurring expenses, like your electricity bill. The best way to do this is to compare your current costs to other providers in your area. We’ve partnered with a powerful comparison tool called eConnex to help make this process fast and easy. You can even use your most current bill details to get an accurate comparison. Enter your postcode in the box below to get started
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The other thing you want to factor in is the hidden costs of interrupted retirement savings, especially if your current employer offers super with employer matching. A year of missing payments can cost you tens of thousands of dollars in retirement savings, which means that you’ll either have to make extra payments later or retire later than initially planned. (Early withdrawals of your retirement accounts are also a bad idea, if not for the penalties alone).
Try to avoid quitting your job without something else lined up, as you won’t know when you might get another job. If you choose to do so, try to save up enough money for at least six months worth of expenses, if not more.