Financial Planning Before Quitting Your Job: 3 Essential Steps

Check these off your list before resigning.

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Key points

• A hot labor market is inspiring many workers to quit their jobs and seek out new ones.
• Before going that route, make sure you can replace a missing paycheck for a bit, secure health coverage, and avoid leaving money on the table.

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The Great Resignation has been upon us for months, so if you're thinking of quitting your job, you're not alone. Right now, the U.S. labor market is loaded with opportunities. If you're feeling bored, stifled, or underpaid at your current job, it could pay to tender your resignation and throw yourself into searching for a new one. But before you leave a job without another one lined up, check these key financial items off your list.

1. Make sure you have a healthy amount of savings

Even though there are plenty of jobs out there, it may take some time for you to find the right role. And so if you're set on quitting your job, you'll need to make sure you have enough funds in your savings account to cover at least a few months of expenses.

Remember, if you quit a job voluntarily, you won't be entitled to unemployment benefits or severance pay from your employer. While you may be eligible to get paid out for unused vacation or sick time, that money may only be enough to cover a few weeks' worth of paychecks.

2. Figure out what you'll do for health insurance

If your health insurance is tied to your job, quitting could mean losing that coverage. Even if you get a new job quickly, there may be a waiting period before you can get onto its insurance plan. Before you resign from your current job, figure out how you'll get health insurance -- and how much it will cost you.

If you're married and your spouse has a group health plan through their job, you may be able to enroll in that same plan at a modest cost. Otherwise, you can look at extending your existing health coverage through COBRA or buying your own insurance at healthcare.gov.

3. Use up your FSA

Many people put money into a flexible spending account to enjoy a tax break in the course of paying for medical expenses like prescriptions and visits to the doctor. Normally, with an FSA, you have to use up your funds within your plan year or otherwise risk forfeiting them. But once you leave a job, you lose whatever remaining money you have in your FSA right away. So if you know you'll be quitting your job, you should try to first deplete your FSA balance.

If you're not sure how, think about your medical needs for the next six months. Are there doctor's appointments you can push up? Prescriptions you can renew ahead of time, and in bulk? Eligible over-the-counter items (like band-aids and other first-aid items) you can stock up on? Explore all options before giving that money up.

Quitting a job can be a scary prospect -- especially if you do so at a time when you don't have another role lined up. But sometimes, you need to leave a job to focus on a full-fledged search. If that's the route you're taking, checking these items off your list first should help minimize your stress as you embark on an exciting change.