Planning to quit your job? Here are five tips to be financially ready

Hate your current job or want to build something of our own? Whatever be the reason, quitting your job needs to be planned. Without it, the transition from employment to whatever lies beyond can have serious repercussions on your financial health. It is important to maintain financial stability so that the transition is worry-free. Here are a few tips which will help you be financially ready before you quit your current job:

Assess your current financial position | Before you call it quits, assess your current financial position. The transition to your next job or business could be short or long. But during the transition, you will need money to manage your immediate needs.

Build your emergency corpus | While you’re transitioning, your cash needs can be met with an emergency fund. Ideally, this fund should be 6 to 12 months of your current income. If your expected transition is longer, you will need a bigger fund.

Clear your liabilities | If you owe money to any financial firms, clearing such liabilities should be among your top priorities before quitting your job. Your efforts should be focused on either to clear any outstanding liabilities or reduce it substantially.

Work on Plan B | You may have a Plan A, which is the big reason you quit your job. What if Plan A fails? Have Plan B ready. Get back to a job soon, work on a secondary business, take up part-time or freelance work, and do what’s necessary to get your finances in order.

Be frugal | If you have planned to quit your job without having anything substantial in hand, it is better to reduce your expenses in line with your future needs.