The last three years have been a time of reckoning for many American workers. During the initial stages of the pandemic, millions lost their jobs, and many became full-time stay-at-home parents overnight. Millions of others transitioned abruptly from full-time, on-site work to full-time remote work.
Workers had little choice during the pandemic, but it’s clear that we’re in a transformative time for reassessing our work lives. Knowledge workers are demanding more flexibility from their employers. Remote work also changed the conversation around stay-at-home moms and dads.
There are lots of other reasons you might be considering a job shift, too. Entrepreneurship is on the rise, up 42% from 2019 to 2022, according to a new survey, which found that mid-career workers ages 35-54 were “most likely to say they started their own firm because they felt burnt out from their jobs.”
If you’re rethinking the next chapter in your work life, consider how to prepare your household finances to support a change.
Can I Afford to Be a Stay-at-Home Mom or Dad?
The last few years have found rising numbers of parents, women in particular, considering a transition to parenting full time.
According to a 2021 McKinsey report, 25% of working women were thinking about slowing down career-wise or leaving their jobs entirely. For working mothers of young kids, that number rose to one in three. Lack of childcare, increased workloads at home, mental health struggles, and professional stress all played roles in the women’s decisions.
But your reasons for wanting to leave your job may have nothing to do with the ripple effects of the pandemic. Almost a decade before Covid, a 2013 Pew Research study found that parents of children under 18 found their parenting activities much more meaningful (though much more exhausting) than their job-related activities.
Whatever your reasoning for wanting to stay home with your kids, quitting your job requires careful planning.
Balance Your Budget Before You Take the Leap
Consider how relying on your partner’s income alone could affect your day-to-day budget. Of course you’ll have less cash coming in, but you’ll also eliminate some expenses if you quit your job to be a stay-at-home parent. The biggest one, of course, is childcare — the median annual cost of which ranged from $5,357 to $17,171 in 2022 dollars for one child.
Leaving your job also means that you won’t have commuting expenses or various other work-related costs that crop up, like work clothing and takeout dinners for the family when you’re having a busy week.
To get a better feel for what your lives would be like without your paycheck, try living on just your partner’s salary for a few months while socking yours away in a high-yield savings account. This exercise has the bonus benefit of building up some cash you can use to boost your emergency fund or save for the future.
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Don’t Forget About Your Family’s Long-Term Financial Outlook
Saving for future goals like your kids’ college education and your own retirement are often the first to go when people are cutting costs. But it’s important to keep these grand plans in mind while you’re planning for your stay-at-home life.
For example, many experts say the rule of thumb for retirement savings is saving 10-15% of your pre-tax income. Ask yourself:
- Can we afford to save that much on a single income?
- If not, can we put away some away some extra cash before I leave my job?
- Can we commit to saving at a higher rate when I rejoin the workforce, if that’s part of the plan?
Can I Afford to Quit My Job Without Something Else Lined Up?
It seems that The Great Resignation is still going strong. According to the Bureau of Labor Statistics, 3.9 million people, or 2.5% of the working population, quit their jobs in January 2023.
That same month, there were 10.8 million job openings available to people looking for work. That may be down from the record-high 11.5 million job openings recorded in March 2022, but it’s still a significant bump from the pre-pandemic high of 7.5 million openings in January 2019.
Despite looming economic turmoil, the trend shows few signs of slowing down. A study from LinkedIn found that 61% of American workers are planning on leaving their current jobs sometime during the year 2023. That’s right — theoretically, a year from now, well over half of us could be working different jobs.
If you’re in the same boat, and you want to leave your job to start a business, switch industries, or simply find a company that’s a better fit, here are some steps you can take before you hand in your resignation.
Start With a Conversation
If you have a partner or family members who will be affected by your leaving your job, it’s important to talk through all the possible outcomes before you make any moves.
R.J. Weiss, a certified financial planner and founder of The Ways to Wealth, says that partners should make sure that both parties feel like they have a voice and are included in the conversation. “Make sure you listen to your partner’s concerns and be willing to compromise when necessary. From there, create a joint financial plan that outlines how expenses and responsibilities will be managed during the transition.”
He notes that career transitions are dynamic situations. “Most importantly, establish regular check-ins to update each other on progress and make adjustments as needed.”
Before you even start getting into specific numbers, Weiss recommends an exercise: Envision the worst-case scenario that could occur after you leave your job. Say you start a business that fails, or you aren’t able to find another job that’s the right fit.
“From there, determine what needs to be in place now to prevent that scenario from happening, whether that’s specific calculations, such as how much cash you need to have saved, or a timeline of when you’ll take on work as a consultant versus pursuing your business,” he said.
The Hard Numbers
To figure out whether quitting your job is feasible right now, make a detailed budget that includes your current expenses, plus any additional costs that could arise after you quit, Weiss said. “Then, determine how long your savings can sustain you without a steady income.”
Weiss said that you should have an emergency fund with at least enough to cover six months of your essential expenses in place, before you quit your job without a new one lined up. “Consider extending this to a 12-month emergency fund if you’re planning a more significant career change or starting a business,” he said. “Most importantly, regularly review and adjust your savings plan as needed during the transition.”
Deciding Whether to Stay or Go
Sometimes the best way to increase your income is not by getting a promotion at your current job, but by switching employers entirely. It seems like this conventional wisdom is backed up by data. During The Great Resignation, between April 2021 and March 2022, 60% of workers who switched jobs saw year-over-year growth in their real earnings, according to Pew Research. Only 47% of people who remained with the same company saw a boost in real earnings.
This is especially remarkable because “real earnings” accounts for inflation, which surged during that time period.
Of course, if you’re hoping to find another job rather than starting a business or freelancing, it’s difficult to know exactly how long it will take to find your next role. The Bureau of Labor Statistics found that in February 2023, it took job searchers an average of 19.3 weeks, with a median of 8.3 weeks, to find their next job. That’s down from 26.2 weeks and 9.3 weeks, respectively, in February 2022.
Finally, the oft-repeated advice that it’s easier to find a job while you have a job does, in fact, have basis in reality. Researchers have found that unemployment discrimination can negatively affect job candidates. One analysis of several studies found that candidates who didn’t currently have jobs were perceived as “less competent” and “less warm” than their counterparts who were currently employed.
Should Economic Uncertainty Affect My Plans to Quit?
Layoffs across industries and talk of a coming recession may give you pause if you were hoping to make a major job switch. But Weiss says that you shouldn’t let economic uncertainty be a barrier to pursuing your dreams.
“When creating your worst-case scenario disaster plan, incorporate potential economic challenges and assess their effects on your goals and timelines,” he says. “There’s never a perfect time to do something drastic like quitting a job, but you can plan how your situation may change if there was an economic downfall.”
Changing jobs or stepping back from the workforce should always come after careful conversation and planning. You need to feel prepared to meet current expenses and stay on track for long-term goals, like retirement and college. At the same time, don’t let your worries hold you back from planning a change. Your career and family life satisfaction matters.
If you’re hoping to spend meaningful years with young children or pursue a new career opportunity, sound financial planning can help you make a smoother transition and get the most from whichever decision you choose.
