Most people don’t know the answer to this question. Sometimes, unemployment is the result of layoffs. It does not grant one the opportunity to prepare. Individuals facing this phase will suffer from financial challenges later. However, aspects like emergency funds and investments may prove a backup here.
Alternatively, some individuals quit working as a personal decision. This grants one sufficient time to plan finances. How are you going to spend the cashless months? You may have to search for a part-time job after leaving a regular one. Aspects like- mental issues, health concerns and accidents may make one quit the job.
You can decide on finances within the notice period. Identify the monthly expenses. In some cases, you would need to downsize and curtail expenses. Check the liabilities, such as rent, utilities, and bill payments. It will help you budget for at least 3 months before quitting the job.
6 financial aspects to prepare for before quitting the job
The amount you need to live after unemployment depends on factors. For example- benefits, government grants, and unemployment terms. You can get the period up to which you cannot get another job. It is after living 1 or 2 months as a jobless. It helps one identify the difficulties one faces. First, prepare for medical emergencies.
Most unemployed lack the cash backup to fund the deal. An emergency fund may help you here. Start one today and continue until your last working day. It will help you tap it in urgent situations. Here are other aspects to prepare for before quitting the job:
1) Identify the best way to pay the bills
If you want to become a home parent, you need cash. Identify how you will pay the bills associated with the child and other things. Save for such aspects before quitting the job. Generally, you need around £10000 to meet the infant’s expenses. It may include food, medical consultations and vaccinations. Thus, ensure some flexibility before saving for bills. Consider rent, utility and downsize if you can.
2) Pending sick and casual leave status
Some companies provide the facility to claim the money for the remaining leaves. However, every organisation has its rules. Check and confirm the amount liable for from the firm. It is helpful even if you claim £4000 from the untapped holidays. One must not leave the opportunity as unemployment comes with uncertainty. Try to ensure maximum cash by the time you leave the company.
However, most individuals delay the treatment due to the claim. They want to use the money they may receive from the unpaid leaves. What if it did not turn out as expected? For example, you may believe that you will get £5000. However, you got only £4000. How would you fund the rest of the requirements? Certain financial facilities may help you here.
For example, check the options to get instant cash with a low credit score. Unemployment affects finances and credit rating. However, you may get bad credit loans with minimal proof of affordability. Identify the amount you need and provide the evidence. Any income, such as part-time, income from dividends, or rent, counts as legal.
You may get instant approval with any of these proofs. Finance the medical needs by bridging the amount. Don’t stress about payments. You can repay according to your financial potential.
3) Analyse FSA (Flexible Spending Accounts)
You generally have FSA as a regular employee. However, you need to spend it within the current organisation. You cannot carry it over to your next job. You can use the full amount with the healthcare account. However, with a dependents account, there is a limit.
You can only tap what you contribute to the final paycheck. You may spot a grace period on FSA claims. For example- you may check and claim even after 1 month of leaving the job. You can reimburse medical expenses or other expenses for which you are eligible. Keep the receipts handy to get the benefit.
4) Tap the health insurance cover
If your employer provides health insurance, continue the coverage. Generally, you must pay a premium for at least 18 months to claim benefits. If you have been a regular employee for over 3 years, check it. You may be eligible for some lump sum here.
Confirm it with your employer and check the date. Analyse when you can get health insurance coverage. You can use it for specific medical conditions. Certain situations require more than the bare minimum. It could be anything like- kidney issues or cardiac complexities. The insurance amount may help you tackle it.
5) Pay down your debts
If you want to avoid the hassle of being unemployed, pay the dues. Identify the costly ones to settle first. For example, consider paying credit card debts first. It will help you reduce the costs drastically.
Credit cards are one of the most expensive deals. It may leave you with restrictive finances. Thus, the heavy debts must be analysed and settled first. Do so within the notice period. It will help you avoid constant calls from creditors. However, most individuals struggle with debts after unemployment. They could not pay as they rely solely on government benefits.
You may get a loan on benefits if you need a loan today from a direct lender nearby. It provides additional backup than just benefits. Reveal the slip to get the loan instantly. Some loan providers may require proof of additional income. Thus, you may provide a part-time income source. It grants some additional security to the loan provider.
Use the loan to settle the pending dues. However, the amount you get is low. Still, it may help you fix the requirements quickly.
6) Identify your retirement accounts
You may have an employee retirement account as a part of your service. Most employers transfer the pay to the other company. However, if you are going to lose your job, consider other options. Check whether you may get the dues in your account.
Individuals working for at least 10 years in the company may benefit from this. You can use this cash buffer as a safety net for the future. Don’t tap it for your current needs. You can instead open an individual retirement account. Deposit the sum within it.
Bottom line
These are some aspects to consider before quitting the job. Analyse the cash buffer and your investments. Check the amount you would need after unemployment. The aspect may differ according to the unemployment term, income and saving habits.
Identify and analyse the debts to pay. Settle it now instead of carrying it to the non-repayment period. It prevents you from accumulating debts unnecessarily.
