If you’ve read my piece on the best advice I didn’t take when I quit my job, you probably know that I believe your first step when quitting should be to focus on creating a plan for how you will spend your days. The second step you should take is to get your finances in order, and, if possible, you should start that process before you quit.
Obviously, there are times where an opportunity to leave your situation can take you by surprise, and you won’t always have months to prepare for the change. Layoffs are like that. Blazes of glory, though not recommended, sometimes have to happen.
So, you are in the midst of making this huge change, how do you get your finances in order before you quit your job?
Recurring Credit Card Charges
If possible, before you quit your job, go through your credit cards and figure out what you have on recurring payments. You’d be amazed at the small charges that are being billed to you and that you may have been paying for years. I had online magazine subscriptions that I had long stopped needing. I had charges for online broadcasts that I wasn’t listening to anymore. Get rid of anything that isn’t serving your current interests. Even if the charge is $6 per month, that is $6 you should not be wasting if you don’t have a job. (Note, I recommend this approach even if you still have a job. Wasting money on recurring payments when you could be spending it on Happy Hour just seems wrong).
Now, take a look at the more significant recurring charges. These can be harder, but think about what you can live without, at least in the short-term. You may land on your passion project right away and be well-compensated immediately. But the odds are you will need some period of frugality to help you save as much cash as possible as you find your way.
Stop paying for storage units unless it is an absolute necessity for your life. And I don’t mean that you should keep the storage units because you don’t want to take the time to clean them out. That’s convenience, not necessity. Self-storage is a billion-dollar industry, and for the most part, we are storing things that we don’t need and will never use.
I speak with authority on this subject because I was one of those people. I had a storage unit that held movie props from my projects for years. It also held carpets from my old apartment and miscellaneous stuff that made my one-bedroom apartment seemed cramped. I moved the props out to the producers and sold off my various belongings at yard sales. I realized that I needed nothing in that storage unit, and I had paid approximately $100 per month for four years. I understand why I had the impulse to do it, and at first, when we were still filming the projects, it was an easily accessible place to grab props as needed. It made no sense to do that for four years.
If you quit your job and don’t have an income, you need to do a real assessment of what you have in your storage unit. If you are about to become a digital nomad and need a place for your beloved furniture, I get that (though, many of my friends who have gone that route have been amazed at how little attachment they had to the stuff when they returned to a more consistent address). If you have treasures that you don’t want to part with and are about to make room in your home for them, temporary storage makes sense. Otherwise, it is time to critically assess every item and come to terms with the real opportunity cost of keeping that storage unit to keep it all.
Set a 1-Year Budget
After you have cleared your credit cards of needless recurring charges and released your storage unit, do an accounting of your monthly costs. If you pay your car insurance only once or twice a year, add to your budget what that monthly percentage would be so that it doesn’t surprise you.
Got that number? Now, double that number. That is how much you will need to save to “safely” quit your job for a year, under the assumption that you have zero income for that year.
That’s the reality. No matter how thorough you are in your accounting, you will forget things. You will underestimate how much your health insurance will go up each year. You will forget about stuff like smog checks and registrations. You may underestimate how much travel will cost, or you may need unexpected car repairs. Shit happens. When creating your “Can I Quit My Job Budget,” doubling your expected number will help you save for the surprises.
What if you have been laid off? It’s true, losing your job creates different difficulties. But build the budget anyway. That will give you a better idea of how much will come out of your savings, go onto credit cards or how much you will need to make in side hustles until you find your dream gig.
These financial suggestions are only the beginning. Quitting your job is a tremendous opportunity, and you want to make the most of it. Hopefully, these ideas (based on my mistakes, of course) will help you enjoy the best aspects of making this massive life change.