Are You Ready to Join the Great Resignation?
Read on as personal finance expert Bobbi Rebell examines common scenarios workers may currently find themselves in — and how they can prepare to take the leap into the great unknown.
Bobbi Rebell, CFP®
Personal Finance Expert at Tally
November 3, 2021
Today, many Americans are at a breaking point, and doing what not so long ago was unthinkable — voluntarily leaving their jobs, without another one, at unprecedented rates. Since April, more than 15 million Americans have quit their jobs, often without a new job lined up or plans to get a new job. This trend is being dubbed the “Great Resignation.”
Despite this readiness to jump ship, a recent survey showed that most Americans (54%) live paycheck to paycheck. So how do you avoid getting caught up in the hype of quitting your job and paying the price for an impulsive decision down the road?
As tempting as it may be to up and quit, especially if you’re not ready to head back into the office yet, it’s important to sit down and decide if you can truly afford to step back from your job, as well as what financial steps you need to take to be ready to do so.
Let’s examine a few common scenarios workers may find themselves in and how they can prepare to leap into the great unknown.
Scenario #1 — “I am making payments on my debt, but I have savings and just need to get out of this job. I can always use a credit card for emergencies.”
If you have debt, I’m going to encourage you to put your foot on the brakes before handing in your two-week notice. If you’re still making payments on money you’ve already spent, you’re not ready to be unemployed. To continue repaying your debts, you’ll need to dip into your savings to make the payments. You are setting yourself up for failure and will likely be forced to take any job you can just to keep up. That’s exactly what you wanted to avoid.
Debt can be overwhelming, even when you have an income and things only get worse without money coming in. Take a beat, get on solid financial footing, then you can think about quitting your job.
Start by working your way out of debt in a planned and deliberate way. Use technology to your advantage. If you have credit card debt, consider apps like Tally† to consolidate your credit cards into one payment at a lower interest rate.
Once you get rid of your debt, build that six-month emergency fund and then consider the jump. In the meantime, there’s no harm in hunting for a new job while you still have one. Many companies are experiencing attrition and are eager to hire, so there are opportunities out there that won’t require you to sacrifice a steady stream of income.
Scenario #2: “The pandemic has made me realize I want to be home with my kids and not go back to my in-person job. We are going down to one income.”
If you have the right plan in place, you can scale back at work to focus on your home life. As a parent with a middle school child who went to school over Zoom all of last year, I can relate.
At times, it feels impossible to juggle both full-time parenting and full-time work. Still, before you quit your job to prioritize a more family-focused lifestyle, I recommend living on one income for a few months to see how you manage financially. As a bonus, you’ll save money in the process that can provide a cushion once you quit your job.
That being said, we have to acknowledge the harsh truth here, especially because you have dependents. What happens if your partner’s income disappears? Do you have emergency savings to cover your expenses if neither of you is working? Sit down with your partner and plan for the worst-case scenario.
For a bit of added security, you may want to explore a hybrid situation by switching to part-time work. You don’t have to go from 100% of your income to 0%. If you and your partner have done your budget, are okay with changing your lifestyle, are still able to invest in your future income, and have enough money saved to survive if your partner lost their income, then I’d say you can join the Great Resignation with relative peace of mind.
Scenario #3: “I have enough savings to last 2 to 3 months. I’ll find a new job after that.”
Having two to three months of living expenses saved is a great place to start, but it’s not as much of a cushion as you think. Living paycheck to paycheck is hard. Living without one is even harder. With only a few months of savings set aside, you aren’t ready to jump and hope for the best — you need a plan and a longer runway.
Having a financial cushion is key if you’re going to quit your job without another one lined up. You should build at least a six-month emergency fund that can cover all of your expenses. You have no idea how long it will take to find a new job, but six months gives you a solid amount of time to search.
Before quitting, find out what your options are at your current job. You might even consider asking for a leave of absence from your employer instead of quitting. For example, they may be receptive to giving you a month of unpaid leave, which can provide you with time to rest and reflect or search for a new job.
If you’re set on quitting, you’ll also want to line up some form of income for the break. Secure a few freelance opportunities or look into some remote work-from-home options. That way, you can seamlessly be searching for your next job or at least other income streams while you still have some income coming in.
With money flowing in, you’ll probably have less stress on your plate than if you went cold turkey. It’s so important to have some income available to help with any curveballs during this transition.
Joining the Great Resignation is a lot easier if you don’t have credit card debt weighing you down! Let Tally help you eliminate your debt so you can focus on making career moves.†
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.