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The Great Resignation | Employees: Here's How to Prepare for a Resignation

The Great Resignation | Employees: Here's How to Prepare for a Resignation

February 03, 2022
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Over 38 million people resigned in 2021. They are calling it the “Great Resignation.” Economists point to many reasons why this might be happening, but most agree Covid is the driver. 

First, the pandemic is changing the way we do work. We’ve reimagined everything we do through the work-from-home lens.

I recently pulled up to a fast-food restaurant’s drive-through, and a person (who was clearly working from home) appeared on a screen to take my order. Unbelievable! What a fascinating time. I believe we are seeing the future accelerated because Covid has forced us to rethink what positions can be virtual.

But it’s not just the work-from-home aspect that has caused employees to resign for better opportunities. The job market is wide open. The number of skilled workers for any given position is down compared to previous years. In fact, 2021 saw record numbers of business owners who were unable to fill open positions with qualified candidates. Check out this graph by the Washington Post: 

It shows how while jobs have come back, the number of people looking for a job has stagnated. This is creating a big labor shortage, especially for skilled positions.  

Consequently, business owners have to get creative to fill their openings. They may have to offer more incentives or higher salaries to draw good employees or keep their good employees. 

To put it simply: There are a lot of opportunities out there for workers.

Perhaps you have been thinking about your career and maybe thinking about changing it up. If that’s the case, we want to speak to the financial planning side of making such a decision. Changing careers or resigning to start a new company requires diligent planning, so you don’t sink the ship. Here are a few considerations:

1) Have a 6-month emergency fund

What is your current annual income? What additional expenses (such as health insurance) might you face due to you leaving your employer? You will want to have six months of savings to live off of, and this fund should cover all of the essentials. Any additional costs you might face if you are starting a new business would be in addition to this 6-month emergency fund. 

2) Figure out health insurance costs

We briefly mentioned it in the last point, but health insurance is a big expense that is typically covered by your employer. If you resign, you will want to have a good idea of what that amount will be. You can go to Healthcare.gov and sign up for health insurance through the marketplace and perhaps even receive a credit since your income will be down. COBRA or non-profit medical cost-sharing plans that work similarly to insurance might be other options.

3) Determine your mortgage options

When going a time without income, the main concern is your cash flow. Maybe you have a large 401(k) or significant equity in your home, and your long-term financial health is not so much a concern. However, you still need to pay the bills right now. In that regard, maybe it makes sense to refinance to lower your mortgage payment or lock in a lower interest rate, so your payments are lower, and you can tap into some of the home equity. Talk to your financial advisor about this one. 

4) Consider your business startup costs

Business loans can be hard to come by, so you may need to use personal savings or a personal loan. Just be careful with personal loans because most personal loans are tied to collateral such as your vehicle or -- in the case of a home equity loan -- your house! Using a CPA, attorney, and financial planner to help you determine the costs and create a business plan could be very helpful and well worth the money to make sure you get started on the right path.

5) Consult with your loved ones, and network, network, network

Your decision impacts everyone in your household, so it should go without saying that you should consult with them. But beyond that, reach out to those who know you best, meet them for coffee and ask for advice. They can help you look inward to identify strengths you can lean into and weaknesses you should be aware of as you begin this new venture. Reach out to those in the industry you are looking to get in. Before you resign, you can network, build connections, and get a good feel for the need out there for your services.

Good luck in your new venture, and please reach out for more personalized financial planning. We are happy to help!