4 Financial Things to Consider When Quitting a Job

How much is your time worth?

For WhatsApp co-founder Brian Acton, a year of his life was worth roughly $850 million—that’s how much money he left behind when he decided to quit Facebook, which bought WhatsApp in 2014 for nearly $22 billion. Had he stayed in his job, his last block of Facebook equity would have unlocked, making him almost a billion dollars richer.

According to Forbes, which landed an exclusive interview with him, Acton didn’t like Facebook’s determination to monetize WhatsApp by any means necessary. “They are businesspeople, they are good businesspeople,” he told the magazine. “They just represent a set of business practices, principles and ethics, and policies that I don’t necessarily agree with.”

Not everyone would make the same decision, of course. In fact, it’s safe to say that a substantial majority of people would trade a year of working someplace they hated for nearly a billion dollars. But if you do decide to quit, here are some financial things to keep in mind:

Equity

Many tech pros have some kind of equity in their companies. If you’re one of them, you hopefully understand your equity plan and the milestones needed to unlock value. Larger companies tend to have “standard” equity plan documents, but smaller ones (re: startups) may present more of an ad hoc agreement when you join up; in either case, you may want an attorney to review the document before you sign anything.

When deciding whether to quit, make sure you understand the conditions under which you can vest and exercise equity (there are big differences if the company is public or private, for example), and whether you’re leaving anything on the proverbial table. If your equity was scheduled to vest over five years, and you’re in your seventh year at the firm, and you’ve gotten your full block of stock options, you can probably quit with a clear conscience; but if you still have stock unvested, you may want to hold off your resignation until you hit the right milestones.

If you have incentive stock options (ISOs), you’ll generally have 90 days after you leave the company to exercise your options. For non-qualified stock options, the initial equity plan may outline a different schedule for exercising. And that’s before you begin to consider the tax implications of all this, especially if your strike price is higher than the stock’s valuation (a condition known as being “underwater”).

In short, before you resign, make sure you consult with an attorney and/or a financial planner to see how you can get the most out of your potential equity. But a lot of your reward will hinge on how thoroughly you negotiated your initial employment agreement at the outset of your tenure with your company.

Unpaid PTO

Don’t leave your unpaid PTO behind; make sure you bring this up to HR and your manager when you quit. In many states, a payout is the law.

This is where the rise of “unlimited vacation time” (especially in tech) comes into play. At companies with these “unlimited” policies, employees don’t build up discrete blocks of vacation time, and so there’s nothing to pay out when they leave. If your company has unlimited vacation time, and you’re thinking of quitting, you need to factor this lack of a PTO payout into your financial planning.

Health Insurance

Quitting early in a month may allow you to keep your health insurance for the balance of the month, shortening your “health insurance gap.” Remember, COBRA is expensive, and signing up for plans under the ACA can sometimes prove an exercise in frustration; anything that reduces the time you need to deal with alternative programs before your next job’s health insurance cycles up, the better.

Have an Emergency Fund

This should go (almost) without saying: If you don’t have another job immediately lined up, make sure you have as large an “emergency fund” as possible. Sure, unemployment in the technology industry is very low at the moment, and employers are scrambling to find anyone with the right mix of skills and experience—but you never know when your job hunt might last far longer than you expect.

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One Response to “4 Financial Things to Consider When Quitting a Job”

  1. Here is a COBRA fact in my case: I pay hundreds less for more coverage (drug plan) using COBRA after a layoff ($1270.00/mo for Family) than what is available on the ACA website and from private individual insurance companies. I was surprised since COBRA was always a more costly option in the past before the ACA. Covering preexisting conditions and critical diagnostics (colonoscopy etc.) along with rising healthcare costs in general, has allowed insurers to raise rates. Without a group policy, plan on paying more without COBRA. If you quit (no COBRA) then plan on paying a lot more with less coverage on the market.