Quitting Your Job? Suze Orman Says to Do This First

It's an important move to make if you're jumping on the Great Resignation bandwagon.

At this time two years ago, the U.S. labor market was in a very bad place. Unemployment was rampant, so much so that lawmakers were doling out stimulus aid in an effort to help the jobless stay afloat.

But today's labor market is very different. Unemployment rates are down and job openings are up. And that's given workers the leeway to quit their jobs and pursue better opportunities.

If you're hoping to be a part of the aptly named Great Resignation, the reality is that now's a pretty good time to leave a job. Not only are openings abundant, but some companies are so desperate to hire that they're throwing extra incentives at potential candidates, from higher wages to sign-on bonuses.

But if you're going to quit your job without having another one lined up, financial expert Suze Orman says that it's important to have a solid emergency fund. Otherwise, you may end up in a situation where you're forced to take a replacement job that isn't the right fit. Worse yet, you might end up in serious debt if it takes longer than anticipated to find a new job.

Having savings buys you freedom

Millions of Americans have quit their jobs in the course of the Great Resignation. But while you may be eager to leave a bad job situation behind, it's also important to remember that many financial experts are sounding warnings about an impending recession. If such an event were to occur, it could lead to a decline in job opportunities. And so if you leave your job without another lined up, you'll run the risk of remaining out of work for quite some time.

Furthermore, if you leave your job voluntarily and aren't terminated by your employer, you won't be entitled to unemployment benefits. And in the absence of having another job lined up, you'll need a way to pay your bills.

That's why it's so important to have a strong emergency fund before you quit your job. Orman says that you should actually have enough money in your savings account to cover eight to 12 months' worth of living expenses before voluntarily giving up your paycheck.

Granted, Orman's emergency fund guidelines tend to be more aggressive than that of other experts. You'll often hear that a three- to six-month emergency fund is sufficient, especially during periods when the labor market is healthy (which is the case today).

But the events of early 2020 may have spooked some experts into upping their recommendations for emergency savings. And if you really want the freedom to explore different job opportunities without having to settle, then it pays to follow Orman's guidance.

A more secure way to resign

Eager as you may be to quit your job, a better bet may be to wait to have another offer on the table before giving your two weeks' notice. Even if a recession doesn't hit anytime soon, it can still take longer than you expect to find a new job. Waiting to line one up before quitting could make it so you're able to preserve the savings you've worked hard to build. And it could also mean not having to face a gap in health insurance coverage -- another hazard of quitting a job without another at the ready.