Business

Planning to quit your job? Keep a financial parachute ready before you jump

Updated : November 12, 2019 05:02 PM IST

While shifting jobs or starting a new venture, you will have some expenses, which should be met through an emergency fund.

It is important not only to consider your current position and compensation but also where your career will be in 5 or 10 years from now.

Planning to quit your job? Keep a financial parachute ready before you jump

Quitting your job can be a big decision in your career. While some folks quit their current job to start a venture of their own, others may take this step for a better opportunity in other organisations. While this is a personal decision for most, it is important to think through such a step from a financial point of view to ensure a change in career does not affect your families’ financial status and lifestyle. I will touch upon five important parametres to consider while evaluating a change of path in your career.

Gauge your current financial status

Stay protected! Your current employer would have offered certain employee benefits like health and life insurance. A transition to other organisations will cease this and you must be prepared to shift your policy to a personal health insurance or in the case of life insurance choose an adequate term insurance cover. Speak with an insurance intermediary to help you through this.

Ensure an emergency corpus

While shifting jobs or starting a new venture, you will have some expenses. These expenses should be met through an emergency fund that could be created by investing a fixed amount each month in a balanced or safe mutual fund through an SIP. Mutual funds provide excellent benefits over a long term investment. For short term needs explore shirt term funds (liquid funds) or fixed deposits.

Clear all past liabilities

Before quitting your job, make sure any past dues or pending payments like EMIs are cleared. For a running loan try making pre-payments to reduce the liability of the loan and reduce the burden on you during the transition period.

Have a Plan B, C and D!

To avoid vulnerability and uncertainty, keep a plan B, C and D in place in case things do not work out at your new organisation. Stability should always be a priority to maintain the lifestyle you currently lead. It is possible things may not fall in place and you may be left with a situation where there is no monthly income being generated and hence back up plans are important.

Review. Revise.

An impatient man works twice. Do not take such decisions in haste. In case post your evaluation of your financial status, you feel that you are not ready to make the jump then talk to your current organization and see if some improvements can be made and if the HR can help retain you. Be frugal with your expenses and save wherever possible by cutting down on luxurious outings and travel.

It is important not only to consider your current position and compensation but also where your career will be in 5 or 10 years from now. While the points mentioned above are important, also speak to friends and family who have been through such situations to understand what mistakes they may have made and how you can avoid them.

Varun Pandey, Head – Distribution at Coretree Insurance Brokers (India) Pvt. Ltd. The views are personal.

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