How To Do A Financial Check-up before you quit your job

How do I make sure I don’t go broke after I quit my job?

I’ve found finances are one of the best challenges to most people quitting their jobs ot pursue their calling. Oftentimes people aren’t sure if they are in a financially good place to quit. Many are unsure where to start.

As you’re doing a financial check up the goal is to ensure you’re in a position to handle the financial hiccups of life, so when you quit and take time off or take a lower paying job you won’t find yourself in financial distress.

I used my 20+ years of financial planning experience to create a method called P.A.T.H., to be used as a guide to get and keep you on the path to financial security.

Use our P.A.T.H. To Financial Security as a guide to do a financial checkup

• P-Plan for managing money

• A-Adequate insurance to protect your family's finances

• T-Target your investments to your financial goals

• H- Have a written estate plan

Use the questions below as a guide to testing your level of financial security before you leave your job. If married, I encourage you to do these questions with your spouse.

P-Plan for managing money

Budgeting Realistically

1. Do your budget spending categories reflect how you spend? 

2. Are you spending too much in one budget category with little money left for other categories, such as a car costing you more than 10% of your monthly income?

3. Are there changes you want/need to make to your spending to manage the transition into your calling?

Saving Consistently

1. Do you have enough saved to cover the time you won’t have an income?

2. On top of covering a loss of income, do you have enough to cover the “what if’s- car repair, home repair? Rule of thumb is to at a minimum have extra to cover deductibles?

3. If you’re have plans for your transition period, like starting a business or bucket list travel, are you saving for these goals?

Pay Off Debt Rapidly

1. What percentage of your income is going towards debt?

2. Do you feel you’ll be able to financially manage a loss of income with your debt?

3. If not, how much debt do you want to pay off before you quit? What amount are you going to commit to paying off your debt?

A-Adequate insurance to protect your future

Insure Smartly

1. What’s your plan for healthcare when you leave your job? What will it cost?

2. How much are your insurance deductibles? Do you feel you could easily cover it if you did not have an income?

3. Are you covered if your area is prone to natural disasters (i.e, hurricanes, tornados)?

T-Target your investments to your G.O.A.L.

Invest sensibly 

1. G- Goal timeline- Deciding when you need the money is the first step to sensible investing. Have you decided the purpose of the funds you want to invest along with when you’ll need the money?

2. O-Optimize investments-Certain investments are a better choice for certain goals. A rule of thumb is a high yield savings account is good choice for goals under a year and other investments like stock mutual funds are considered better for long term goals like retirement. Are your investments the optimal choice for your goal timeline?

3. A- Assess your risk tolerance. In an average recession, the market drops about 30%. Are you invested in funds you are O.K. having when the market drops?

4. L- Leveraging technology. & institutions. Are you managing your investments yourself or are you fully taking advantage of technology like roboadvisors, auto rebalance. Are you taking advantage of mutual fund institutions that simply investments through options like balance funds, index funds, target date funds or asset allocation funds?

Retire comfortably

1. What will you do with your 401k plan once you leave your job?

2. Have you researched the tax implications of your choice?

3. Have you estimated the impact your transition will have on your retirement?

H-Have a written plan estate plan

Protect Your Family’s Financial Security Generationally

1. Are you confident that your family will be financially secure if something happens to you? 

2. Do you know if you have the estate documents needed to ensure your wishes are carried out if you prematurely pass away?

3. Have you reviewed your beneficiaries to make sure that your money will go to the right person if something happens to you?   

RECAP

Financial security is how well you can ride the highs and lows of life without getting financially off track. Below is a simple, practical P.A.T.H. To Financial Security.

• P-Plan for managing money

• A-Adequate Insurance to protect your family's finances

• T-Target Investments to your G.O.A.L.

• H-Have a written estate plan

Use the P.A.T.H. To Financial Security as a guide to review your finances at least annually to ensure you're on the right financial track.