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Use Your Emergency Fund When You Quit

This article was written by in Career and Work. 10 comments.


Last week, I offered eight questions you should consider before quitting your job, and one of those questions pertained to the preparedness of your emergency fund. A reader, Qixx, pointed out that the decision to quit your job is not an emergency, and shouldn’t warrant dipping into cash set aside for true emergencies. The loss of income generated by quitting a job with no other immediate replacement is a choice, not something that is forced upon you.

Qixx is right. Quitting a job is a choice. Often, an employee who is dissatisfied with his working environment could hold on longer, juggling finding a new job with current responsibilities. After all, it’s easier to be hired somewhere else without any gaps in your work history. If you quit too soon, you could make it more difficult to pick up new employment, especially in today’s job market, where employers have all the power.

Chess piecesLeaving your employer is a process, and it can be a long one. If you are having problems at the office but your working environment is otherwise good, it’s worthwhile to try to address the problems. While you are working with your boss to resolve the issues, you can be looking for a new opportunity as well as preparing your savings account for the inevitable stress of replacing your income for what you hope will be a short time. Quitting a job should not be a snap decision, and as long as it’s not, you have some time to brace yourself by boosting your savings.

Nevertheless, if your situation cannot be resolved and you decide that you can no longer work in your current environment, you might still consider this an emergency, sufficient for dipping into the emergency fund portion of your savings. The emergency fund is just a label for your savings, and if you have more money in your bank account than what you’ve labeled “emergency fund,” you are able to shift money around — or just shift your categorization. Use your emergency fund if you must. Staying in a bad working environment longer than necessary could be more damaging to yourself than using your emergency fund to cover your expenses while looking for a new job.

If working conditions are so bad that you have decided to quit your job, don’t stay there. Your co-workers and supervisors, many of whom can easily tell when someone has already decided to quit and is just hanging on, will appreciate your taking action as quickly as possible. It’s important for the organization to find a replacement for you, as your productivity as someone who no longer cares about their job will surely be damaged. In this respect, once you’ve address the eight questions and have decided to quit, it’s best to do it right away, even if you don’t yet have replacement income.

The danger is going into debt to pay your bills, and you should do whatever possible to avoid this situation. If you haven’t prepared financially at all, and you have no savings, emergency fund or otherwise, you end up in a tough situation. You need to quit, but you can’t from a financial perspective. This is a good reason to always be prepared for the loss of your job. If you haven’t achieved that condition yet, get there as soon as possible in the event your job ever becomes something on which you can no longer spend five minutes while retaining your sanity.

The consequences of dipping into your emergency fund are often less severe than the consequences of spending more time in a job that for whatever reason you are no longer suited for. You may be able to put up with it, but consider your co-workers who must also put up with you. You might be able to put on a brave face and continue to work everyday in a job you hate, but it will eventually wear you out emotionally. Changing your life for the better is always the bravest choice in a difficult decision, and in the future, you’ll look back and think, “I wish I had left that job sooner.” Despite the collateral damage to your finances, it’s better to move on quickly. You can rebuild your emergency fund, but you can’t get back the time you wasted in a bad working situation. Time is valuable when life is short.

If you quit without dipping into your emergency fund, that’s optimal. But if you have the savings and the only thing preventing you from getting out of a bad situation is the desire to leave that money alone in the event of a more difficult emergency, do not hesitate any longer. Use it, change your life, and rebuild your savings when you can.

Photo: liza31337

Published or updated June 4, 2012. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 10 comments… read them below or add one }

avatar Ceecee ♦53 (Newbie)

I think it is an emergency to quit a job that is crushing your spirit and lowering your self-esteem. I stayed at one too long and ended up clinically depressed. Guess what those therapy bills cost?When a job is a truly bad fit for you and you stay there, you often pay in other ways.

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avatar Money Beagle

I think this is good advice if you retire, but if you are quitting with the intent to go back to work, I wouldn’t use my emergency fund unless it was necessary. Eventually you’ll have to re-stock it and there’s no guarantee you’ll make the same or more money to be able to do so. If you need the money, fine, but just to use it because it’s there and you no longer have an option, I don’t think that’s a good enough excuse.

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avatar krantcents

Unless you have at least 6 months of expenses in your emergency fund, you will exhaust it pretty quickly. It is a difficult employment market and one should probably get their next job while still employed if possible. Even in this economy, there is a bias against unemployed people.

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avatar qixx ♦1,895 (Half-Dollar)

Even 6 months is turning out to be not enough for a good portion of the population. According to the Bureau for Labor Statistics (BLS) the average length of unemployment before finding a new job is about 40 weeks. That works out to just over 9 months. If you are over 55 than that time jumps to over 1 year (BLS 2012).

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avatar PB @ EconomicallyHumble.com

The economy is still getting battered so I would hold out on the job as long as possible…. having a job right now is a blessing….. even if they employer stinks.

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avatar Steve

On the one hand, in some industries (including mine, technology), it seems to take only about 4 weeks to get a new job. That’s not so long that you couldn’t survive (knowing the end was near) at an existing job, even a toxic one, unless your life is being literally threatened by your boss and/or coworkers.

On the other hand, in some industries and/or roles, it can take many months to find a new position. In that case you could go through your emergency fund and still not have a job.

So it seems like a “da**ed if you do, da**ed if you don’t” situation. I guess the only reason I would quit a job, planning to get another one but not having it lined up already, is if I needed to throw my metaphorical hat over the wall – that is, I had been inertial up to that point and wanted to spur myself into action.

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avatar Luke Landes ♦127,500 (Platinum)

And with the very real threat of your money out, you can be certain your motivation for finding a new job would increase. Many people who want to quit but don’t only lazily search for a new job because, although they hate where they are, there’s no real threat other than the lack of satisfaction they’ve learned to tolerate.

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avatar Lance@MoneyLife&More

I totally agree with you. If you’re in a bad situation I think you should be able to dip into your emergency fund. However, I think it has to be a truely bad situation. Don’t quit because you always get scheduled to work during your favorite TV show. An emergency fund is there to cover the times you don’t have any other source of money to cover your expenses. Going into debt over using your emergency fund is not a good option.

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avatar Jessica

Emergency fund should be spent in crisis and not to Luxuriate or enjoy; but first of all one should not quit job until other job is confirmed as it is a blessing in current situation to have a job. There are many people in queue waiting but if there isn’t any option other than quitting then keep an emergency fund on the safe side and quit…

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avatar tigernicole86 ♦55 (Newbie)

I’ll agree that the ER fund is not to be taken lightly. I understand the toll that a toxic job can take. At my last job, I was grinding my teeth every night while I slept( and didn’t realize it) until my jaw hurt(the dentist wondered why a 22-year old would have such jaw pain already with no cavities), talking in my sleep, and being perpetually sick. I knew after about a year that I was leaving as soon as I could and made sure to cut back on everything I could and put the difference to my savings. I stayed for over 2 years but I was lucky when I decided to take a “sick day” to travel 3 hours away for a job interview where my fiance lived(and now where I live too!) at a good company. I wasn’t offered the job the same day but I had even had enough with that current job. I was writing up my 2 weeks notice a few days later but lo and behold, a phone call telling me I got the new job. Now, I love my new job. I don’t grind my teeth, my rate of pay is much higher, and it was worth taking only the moving costs and 2 weeks without pay and using my ER fund only sparingly.

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