Make These 6 Money Moves Before Quitting Your Job

5 min read
Young man relaxing in an orange hammock by a misty lake holding a cup of coffee, looking at laptop on his lap.

Many people dream of quitting the 9 to 5 hustle. For some, the idea of going into business for themselves or taking a travel-sabbatical sounds exhilarating. Others may need to exit a toxic workplace before they’ve found a new job with a different employer. Whatever the reason for wanting to quit your job, if you’re like most, you’ll still have bills to pay.

Quitting your job without a plan for keeping up with your financial obligations could prove challenging without a regular paycheck, steady benefits, or a smart exit strategy. So, if you’re already plotting your resignation, here are six money moves to consider first—and well before you quit your job for good.

How to Get Your Finances Ready Before Quitting Your Job

The drop in income that usually comes with quitting a job can cause a lot of anxiety and fear. Along with reducing spending, increasing saving, and paying off debt, having an exit strategy can make the transition smoother.

1. Build up your emergency fund.

Experts recommend having three to six months of living expenses in emergency savings to cover surprise bills or ongoing costs if you’re out of work. If your essential expenses are roughly $3,000 per month, that would mean having at least $9,000 to $18,000 set aside in emergency savings before quitting your job. However, if you plan to have no income for longer than six months or want more of a financial buffer, setting aside even more is recommended. According to May 2023 data from the Bureau of Labor and Statistics, it’s been taking about five months on average for unemployed workers to find a new job. Saving up as much money as possible can provide a buffer in case it takes you longer than expected.

2. Create a bare-bones budget.

A bare-bones budget means cutting your spending down to the bare minimum—covering only the most basic, necessary expenses—with minimal to no discretionary spending. Bare-bones budgets are very restrictive, so they’re typically used only as a temporary measure (not as a long-term budget plan) to dramatically reduce spending. Cutting back to just the basics for a few months (or more) before quitting your job can help you build savings faster and help your savings last longer once you decide to leave.

Start building a bare-bones budget by isolating your necessary expenses from your other spending. Your credit card and bank statements can help you quickly identify and highlight those transactions. Basic expenses generally will include items such as rent or mortgage payments, utilities, health insurance, groceries for meals cooked at home, childcare, minimum debt payments, and basic transportation. Once you’ve identified your necessary expenses, it’s much easier to decide what expenses should be cut.

Ordinarily, it makes sense to budget for things you want or enjoy, such as concerts, dining out, or streaming services. But when you’re reducing your spending to save as much money as you possibly can before quitting your job, every penny counts. Contributions to a retirement plan should remain a priority, however, this may mean temporarily reducing the amount you set aside each month.

3. Consider your options for medical insurance.

Once you quit your job, you’ll continue to need medical coverage in the event of injury or illness. COBRA allows you to continue coverage (usually for up to 18 months) after you leave your employer. You can also buy an Affordable Care Act (ACA) plan through a public exchange or the health insurance marketplace. Or switching to your spouse or partner’s plan may be a possibility. When it comes to cost, marketplace plans are usually more favorable, however, COBRA has no pre-existing medical conditions clause that would prevent you from receiving treatment. If you’re under age 26 you may be able to get coverage under your parent’s health insurance plan.

4. Consolidate high-interest debt.

Well before you decide to leave your job, plan for how you’ll continue paying off debt, such as credit cards and student loans. For example, while you’re still employed, you might consider taking out a fixed-rate personal loan to consolidate multiple high-interest credit cards into one single monthly payment. Consolidating at a lower interest rate than you’re paying on all those cards combined could reduce your overall cost of borrowing.

After you leave your job, in some instances student loan borrowers may be able to pause payments with a deferment or hardship forbearance during an employment gap, depending on whether you have a federal or private student loan. Check with your lender if you think you may have trouble repaying your student loans. Generally, for federal loans, you must be receiving unemployment benefits or actively seeking work to get an unemployment deferment. Also, interest may still accrue even with payments suspended, increasing your balance. Making interest-only payments during deferment or forbearance can prevent your loan balance from growing.

5. Decide what to do with your 401(k).

If you have a 401(k) or other employer-sponsored retirement plan, log into your account to review your balance and other details that may require attention. For example:

  • Will you need to do an IRA rollover? Typically, you can keep your 401(k) with your former employer, roll it over into an IRA, or cash out the account when you leave your job (though cashing out may result in a substantial tax penalty). Rolling the funds into an IRA is usually best to avoid penalties. Be sure to compare the fees from your existing plan versus an IRA and make a cost-effective choice.

  • Did you borrow money from your 401(k)? While some employer plans may allow you to continue making installment payments on a 401(k) loan, others may expect immediate repayment when you leave. If you don’t repay what is owed according to your employer plan, it could result in an unexpected tax bill.

If you leave your retirement savings with your employer, just don’t forget about it. A 2023 study found that there are an estimated 29.2 million “forgotten” 401(k)s representing $1.65 trillion in assets. Even if your account is small, it’s worth keeping an eye on given the potential long-term growth you could see from those returns.

6. Start your new business (or job search) while still employed.

A common exit strategy is to stay at your current job to keep a steady income flow until you’ve either received a new offer from another employer or are truly ready to launch out on your own. If you’re not anxious about making your rent or mortgage payment, you’ll be able to focus your attention on what is important, such as making sure your idea is viable, pricing your services, or taking your time to interview potential new employers. It will also give you time to prepare for whatever comes next: opening a business bank account, setting up bookkeeping and tax software, creating a go-to-market plan, or obtaining a certification.

The Bottom Line

Quitting a job before lining up another one was once considered taboo. Ultimately, it’s a personal decision, and depending on the circumstances, it could be the right one for you. If you want to plan for what to do before quitting your job, the steps above can help get your money in order before you make a move. With enough savings in the bank, debt and expenses under control, and an exit strategy in place before you say goodbye, you’ll have more peace of mind whenever you finally do decide to quit.

You May Also Like

Related Resource Center
Soft inquiries won’t impact your credit scores, and hard inquiries can hurt your scores slightly. Here's what you need to know.
Oct 9, 2023
6 min read
woman on mobile phone image
Take control of your money and personal wellbeing with tips to recognize burnout and restore your physical, financial, and emotional health.
Aug 7, 2023
6 min read
Woman in pink blazer sitting on ground with laptop in lap next to young girl looking at documents
With six in 10 U.S. consumers living paycheck to paycheck, could budgeting, saving, debt management, or side income be the antidote?
Jul 25, 2023
5 min read
Paycheck to Paycheck
Your credit score plays a role in nearly every financial move you make. Having a great credit score can save you hundreds (or thousands) of dollars a year through lower interest rates on your credit card accounts, personal loans, moving loans, car loans, or mortgage.
Jul 9, 2023
4 min read
Man in denim button up holding a phone, sitting at table smiling
Learn four of the best ways to check your credit score, plus types of scoring models, what your credit score means, and the importance of checking your credit score on a regular basis.
Jun 20, 2023
6 min read
Photo of a woman back from behind with her laptop open to a website showing her credit score
Related Impact
From groceries and diapers to Halloween costumes for pets, nearly 60% of American consumers prefer to shop online for everyday items that make life more convenient, comfortable, and enjoyable. And with rising prices showing no signs of stopping anytime soon, we’re pleased to introduce StackitTM from LendingClub Bank—a new browser extension that automatically finds and rewards eligible members with coupons and cash back for extra savings at more than 15,000 favorite online retailers.
Nov 13, 2022
2 min read
blog header stackit 765x430 v1-1
Even in today’s low-yield, high-inflation environment, it’s essential to keep a certain amount of money in an easy-to-access checking or savings account for things like daily household and emergency expenses, or to meet short-term financial goals.
Oct 2, 2022
5 min read
LendingClub Rewards Checking Nationally Certified as Trusted, Afforda
Since 2007, LendingClub has been on a mission to deliver a world-class experience to all our members. This month we took a moment to reflect on the more than four million members who have chosen LendingClub as their partner to help them reach their financial goals.
Apr 19, 2022
2 min read
Illustration of large number 4 and letter M made up of colorful, tiny illustrations of ethnically diverse people
In March 2022, we hosted our first quarterly webinar where we celebrated our one-year anniversary as a digital marketplace bank. 
Mar 6, 2022
less than a minute read
LendingClub completed the acquisition of Radius Bank in February 2021. At that time, in addition to the direct-to-consumer deposit business, we inherited a fintech partner program, and several lending businesses. As we reach the one-year anniversary of the acquisition, and in conjunction with the conclusion of a strategic review of our business operations, we have made the decision to discontinue certain businesses that don’t fit our mission.  
Jan 2, 2022
2 min read
Man in blue button up shirt and glasses smiling
Related FAQ's
We offer several ways for you to make your monthly auto loan payment, so you can choose the method that works best for you. A statement will be mailed to you every month that shows the payment amount and due date.
Nov 29, 2023
less than a minute read
LendingClub provides a year-end statement that summarizes your account activity, including how much interest you’ve earned and information regarding Notes tied to loans that have been charged off.
Jun 7, 2023
less than a minute read
Adding creditors to your balance transfer loan is easy.
Jun 7, 2023
3 min read
To qualify for a lending product with LendingClub Bank, you must...
Jun 7, 2023
less than a minute read
You can partially or fully prepay your loan at any time with absolutely no prepayment penalty or fee.
Jun 7, 2023
less than a minute read
Related Glossary
{noun} A type of credit that allows the borrower to make charges and payments against a set borrowing limit, paying interest only on outstanding balances.
Sep 6, 2023
4 min read
{noun} The total annual cost to borrow money, including fees, expressed as a percentage.
Mar 21, 2023
3 min read
{noun} The amount of unpaid interest that has accumulated as of a specific date, either on a loan or an interest-bearing account or investment. 
Mar 21, 2023
4 min read
A debt that is written off as a loss because the financial institution or creditor believes it is no longer collectible due to a substantial period of nonpayment.
Feb 7, 2023
3 min read
{noun} An interest rate that remains the same for a set time, usually for the life of the loan.
Feb 4, 2023
3 min read

LendingClub Bank and its affiliates (collectively, "LendingClub") do not offer legal, financial, or other professional advice. The content on this page is for informational or advertising purposes only and is not a substitute for individualized professional advice. LendingClub is not affiliated with or making any representation as to the company(ies), services, and/or products referenced. LendingClub is not responsible for the content of third-party website(s), and links to those sites should not be viewed as an endorsement. By clicking links to third-party website(s), users are leaving LendingClub’s website. LendingClub does not represent any third party, including any website user, who enters into a transaction as a result of visiting a third-party website. Privacy and security policies of third-party websites may differ from those of the LendingClub website.

Savings are not guaranteed and depend upon various factors, including but not limited to interest rates, fees, and loan term length.

A representative example of payment terms for a Personal Loan is as follows: a borrower receives a loan of $19,584 for a term of 36 months, with an interest rate of 10.29% and a 6.00% origination fee of $1,190 for an APR of 14.60%. In this example, the borrower will receive $18,663 and will make 36 monthly payments of $643. Loan amounts range from $1,000 to $40,000 and loan term lengths range from 24 months to 60 months. Some amounts, rates, and term lengths may be unavailable in certain states.

For Personal Loans, APR ranges from 9.57% to 35.99% and origination fee ranges from 3.00% to 8.00% of the loan amount. APRs and origination fees are determined at the time of application. Lowest APR is available to borrowers with excellent credit. Advertised rates and fees are valid as of July 11, 2024 and are subject to change without notice.

Checking a rate through us generates a soft credit inquiry on a person’s credit report, which is visible only to that person. A hard credit inquiry, which is visible to that person and others, and which may affect that person’s credit score, only appears on the person’s credit report if and when a loan is issued to the person. Credit eligibility is not guaranteed. APR and other credit terms depend upon credit score and other key financing characteristics, including but not limited to the amount financed, loan term length, and credit usage and history.  

Unless otherwise specified, all credit and deposit products are provided by LendingClub Bank, N.A., Member FDIC, Equal Housing Lender (“LendingClub Bank”), a wholly-owned subsidiary of LendingClub Corporation, NMLS ID 167439. Credit products are subject to credit approval and may be subject to sufficient investor commitment. ​Deposit accounts are subject to approval. Only deposit products are FDIC insured.

“LendingClub” and the “LC” symbol are trademarks of LendingClub Bank.

© 2024 LendingClub Bank. All rights reserved.