The good side of quitting

Does quitting have a bad rap?

When it comes to the job market, quitting is happening more these days than at any time in the past several years. We tend to associate quitting with giving up or giving in, so you may be surprised to learn that economists are very happy when people quit.

This might be a good time to consider why economists like it when you quit your job, and how you can make quitting work for you.

Why economists like it when you quit

The Bureau of Labor Statistics measures the rate at which people quit their jobs, and lately the year-over-year average of this quit rate has been 1.9 percent. That is the highest it has been at any time since the Great Recession. Economists generally view a rising quit rate as good news for two reasons:

  1. It's a sign of a healthy job market. People are more likely to quit if they feel likely to find a new and better job. Only when the job market is weak do people cling onto their jobs even when they are dissatisfied.

  2. It creates upward wage pressure. One lingering concern during this economic recovery has been that inflation is too low, reflecting a lack of pricing power and creating no incentive for consumers to buy now rather than later. Higher quit rates create upward wage pressures because, in many cases, a higher-paying offer was the impetus for quitting and the job opening created when someone quits represents more demand for workers.

So, economists have no problem seeing the good side of quitting. However, in order to make it work for you, it is important to quit in the right way.

Making quitting work for you

Finding the good side of quitting depends on whether you improve your situation as a result and don't endanger your finances. Here are some ways to make quitting work for you:

  1. Take some time off first. Your impulse to quit may be a sign that you need a break. Before you commit to quitting, take some time off. This will give you time to think, and help you avoid making a decision in the heat of the moment that you may later regret.

  2. Identify what you wish were different. Unless you want to end up with the same set of problems in your next job, you need to identify specifically what you would like to change.

  3. Line up a place to land. Start checking out the job market and going on interviews. Best case, this might help you get a better job lined up before you quit. Worst case, it will be a reality check on whether or not the job situation you seek actually exists in today's market for someone of your skills.

  4. Approach your current employer with any solvable problems. Your relationship with your current employer may be beyond repair; but if there is just a specific problem that is bothering you, perhaps it can be solved. This may be anything from feeling you deserve more pay to wanting to eliminate a particular aspect of your job duties. If you have been a good employee, your employer might appreciate the opportunity to accommodate your request rather than to lose you altogether.

  5. Evaluate the total package. People naturally tend to compare salaries when weighing job offers, but there is a bigger picture than that. The value of benefits — health care coverage, retirement plan contributions, life insurance, etc. — can add up into the thousands. You cannot properly evaluate the economics of making a change unless you consider the full compensation package.

  6. Consider your savings reserves. Again, it's best to line up another job before you quit, but if this is not possible, at least first look at your savings to see how long a period of unemployment they can support. Otherwise, if you put yourself in a position where you are caught short financially, you may find yourself forced to take a job that is worse than the one you quit.

  7. Assess your other income sources. Any change involves some risk, but that risk is mitigated if you are in a two-income household. However, it does not cushion the risk much if the other income involves a shaky job situation or is minor compared to what you make.

  8. Look ahead to any upcoming loan needs. If you are thinking of buying a home or otherwise applying for a loan in the near future, it may pay to do so before you quit your job if you are confident in your ability to secure new employment and repay the loan. Lenders may regard someone who has just changed jobs as a greater risk.

We tend to see quitting as an emotional decision, a cathartic release of frustration. It shouldn't be. Quitting may be the most important financial decision you ever make. As such it should be made calmly and analytically — with some room for an emotional celebration if you get it right.

What is your strategy for a change of employment? What is the minimum/maximum savings needed to bridge the gap in employment, and how do you assess the total employment package?

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Brian @DebtDiscipline
Brian @DebtDiscipline
5 years ago

I think in today’s work environment one should always be in job search mode, it would be best to leave your current position once you have line up another. If you don’t I think you need at least 6 months of saving stashed away or more, there are many factors when trying to land a new role that ca prevent it from happen and you need to be prepared for worst case.

Beth
Beth
5 years ago

A friend of mine gave me a piece of advice that made me laugh: it’s a job, not a marriage. It’s okay to cheat and look at other options. In the industry we’re in, moving around is the norm and it can sometimes hurt you if you stay somewhere more than five years.

Richard Barrington
Richard Barrington
5 years ago
Reply to  Beth

That’s a good way to put it. Loyalty has its place in the job market, but not to the extent of “till death do us part.”

Beth
Beth
5 years ago

You’re right about the stigma! People criticized me for giving up too easily on my teaching career after a couple of years of underemployment. I wasn’t dedicated enough to “pay my dues” and wait out the job market. Meanwhile, other people criticized me for being a “boomerang” and not being able “make it on my own”. A couple of things I learned: Sometimes criticism comes from people who are trying to hold you back rather than helping you move forward. Sometimes it takes more guts to leave a bad situation than it does to “tough it out”. Sometimes it’s only… Read more »

Jeff
Jeff
5 years ago
Reply to  Beth

Like the song says:

You’ve got to know when to hold ’em
Know when to fold ’em
Know when to walk away
Know when to run

Beth
Beth
5 years ago
Reply to  Jeff

That song always comes to mind when I’m thinking about sunk costs. 🙂

Marie
Marie
5 years ago
Reply to  Beth

m pretty sure there’s enough dues paying in teaching as it is, what with the low pay, high pressure, long hours, idiot parents, and spineless school boards.

Fervent Finance
Fervent Finance
5 years ago

I would make sure I had another job offer or income sourced lined up before I pulled the trigger and quit. Today’s job market seems to reward moving around between employers rather than staying put.

Laura
Laura
5 years ago

I have to agree here, although I’d say the job market (still) rewards people who move between employers rather than quit and then try to find something new while unemployed. Of my friends who have switched jobs lately, the only ones who did so successfully already had a new job before leaving or aggressively sought new employment within a week or two after being laid off. The ones who quit to clear their heads with plans to return to the workforce after 6-12 months are still unemployed 2-5 years later (one is being forced to call it early retirement due… Read more »

lmoot
lmoot
5 years ago

See I don’t think that necessarily has to be true. Which is a good thing b/c sometime people quit because they need a break. So having a job lined up is kind of counter-productive if that’s your goal. If you’re quitting for a specific reason, like traveling, volunteering, or going back to school sometimes whatever you choose to do during that time of “unemployment”, can make you stand out in a good way to a prospective employer. I think the idea that you instantly become a less-valuable person if you’re not constantly employed is depressing, and thankfully not really true… Read more »

lmoot
lmoot
5 years ago

I broke all the rules when I quit, but it turned out better than I could have even planned it. I did have some savings, but I also had looming expenses. I relied on some passive income, a part time job, a seasonal job, and an 18 mo 0% cc. To be honest, I didn’t think too far ahead. Part of me didn’t want to have a plan, I think. Of course I didn’t have any dependants so that definitely made it easier to slip into a “risk it all” mindset. I think I’ve always kind of prepared myself for… Read more »

lmoot
lmoot
5 years ago
Reply to  lmoot

*oops, I meant $900, no $90. Don’t think I could manage that even in a cardboard box.

Bryan@ Just One More Year
[email protected] Just One More Year
5 years ago

A timely article for my wife and me at this point in on our financial independence journey! Our strategy for a change in employment is to hit the cross over point where our passive income can cover our budget and current lifestyle. We are only 8 months away! I thought this was a great statement: “We tend to see quitting as an emotional decision, a cathartic release of frustration. It shouldn’t be. Quitting may be the most important financial decision you ever make. As such it should be made calmly and analytically – with some room for an emotional celebration… Read more »

Richard Barrington
Richard Barrington
5 years ago

I’m really enjoying all the thoughtful responses to this post. Bryan, the thing about passive income is to make sure you account for the toll that inflation is likely to take over time. The ideal is to find some work you can enjoy doing part time to complement your investment income. Best of luck to you and your wife!

Shobir @ Millionaires Giving Money
Shobir @ Millionaires Giving Money
5 years ago

Great advice here. In the past I’ve made impulse decisions and quit my job. Fortunately things turned out ok but I took on too much risk and in hindsight some of the points you mentioned should have been followed. Thanks for the tips.

freebird
freebird
5 years ago

A couple of years ago I reached financial independence so I decided to retire. We didn’t have pensions where I worked so retiring is the same as quitting. When I went in for my exit interview, my manager proposed an offer package that allowed me to keep my favorite parts of my job and gave me flexibility to work remotely whenever/wherever I wanted, plus a hefty retention incentive. During my time off I found that I didn’t really have enough to do during the day, so I went back to work under the new terms. It turned out so well… Read more »

Jason @ centplify
Jason @ centplify
5 years ago

I would also like to add that sometimes quitting is just the self-enforced push that you need to bring yourself to start on something you always wanted to do, like a new business perhaps. Job security makes a person feel safe and secured financially, and it can be hard to leave the safe haven for uncertainty that is self-employment. Despite the uncertainty, I come across many individuals who has said quitting their jobs was the best decision ever, and all they needed was that ‘push’.

Millennial Money Man
Millennial Money Man
5 years ago

I recently quit my job to start my own company. I think that there are a lot of benefits to quitting sometimes, especially if you are miserable doing what you are doing. It’s going to take some time to replace my salary, but I’m happier than I’ve been in years (and less stressed out).

Kelli B
Kelli B
5 years ago

Interesting article. I think when you are considering quitting a job you need to evaluate your history. Have you quit a job before? If so, why? If the reasons you quit job A are very similar to the reasons your quitting job B you really need to do some soul searching and figure out how to avoid this issue again.

jrb3
jrb3
5 years ago

Interesting, a chance to revisit why I just quit my most recent job. Frustration, yes, but not with my job! It’s been ten years since I’ve taken more than a week off, fifteen since conducive to unwinding. I value learning and challenge, was not getting that at work, and was blocked from it at home. Also have to cope with a spouse far less financially savvy and far less strategic in choices affecting the household. Burnt out, grumpy, drained from forgoing that which satisfies me, to fulfill others’ impositions. Unhappy camper. So I saved up over the past three years… Read more »

Chella
Chella
5 years ago

A very insightful article. Definitely gives on great direction as far as taking that great step is concerned. And there is more to quitting. Quitting doesn’t mean you lose. Sometimes, quitting needs to happen to make things better.

Alexandra @ Real Simple Finances
Alexandra @ Real Simple Finances
5 years ago

I do like the “fix it before you leave it” approach. I quit a pretty cushy job that had the potential for upward mobility because there was no way to fix what was broken about it. I got a few playfully mocking comments from people in the new field I joined about leaving, since it was obvious I had given up some stability by quitting, but I have never been happier!

Tre
Tre
5 years ago

I’ve noticed that employers seem to believe that if you are unemployed, you are not an “A” employee. There must be something wrong with you. Managers want to hire people away from other companies.

stellamarina
stellamarina
4 years ago

Get all your dental needs done before you leave in case it takes a while for dental insurance to kick in at the new job….or even if they have dental insurance.

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