America has turned into a nation of quitters, though that’s not necessarily a bad thing. Spurred by the COVID pandemic, millions of people have joined “The Great Resignation” that’s happening at many of the nation’s businesses.
Striking out on your own can be liberating. It can also be disastrous, especially if you’re bringing a lot of debt with you when taking this step.
And the way consumers are charging up a storm lately, you just might be.
The urge to quit work vs. the responsibilities of paying off debt can make for a real tug of war. Would-be members of the Great Resignation are asking whether they can afford to quit.
There is no one-size-fits-all answer for that, but there are factors that must be considered before you kiss steady employment goodbye.
Why Are People Quitting Their Jobs?
The pandemic shutdown gave people a lot of time to ponder the meaning of life, and a lot of them came down with Johnny Paycheck Syndrome. Like the singer’s famous ballad, they told employers to take this job and shove it.
Almost 4 million Americans quit work every month in 2021, according to the U.S. Bureau of Labor Statistics. Some experts said it was due to the flood of pandemic relief money from Washington D.C. Those benefits may not have caused the Great Resignation, but they helped fund it.
Studies show the workplace abandonment was largely rooted in job dissatisfaction. The MIT Sloan Management Review analyzed 34 million online employee profiles to identify workers who left their jobs for any reason.
“Toxic culture was the biggest factor pushing employees out the door,” according to the MIT analysis. “It’s 10 times more important than compensation.”
Workers cited things like “failure to promote diversity, equity, and inclusion; workers feeling disrespected; and unethical behavior” as reasons for wanting to leave.
A lot of workers have flat-out retired, but many more are too young or too poor to do that. Once the thrill of quitting subsides, they face the inevitable next question.
How Hard Is It to Find Another Job?
There were about 10.5 million job openings in the U.S. at the start of 2022. That was down slightly from the all-time high established in November of 2021, but it’s still incredibly easy to find a job.
Just not a good job.
More than two-thirds of the openings were in the accommodation and food-service industries, which are not known for high pay or desirable working conditions. In other words, it’s not a great time to be looking for work, unless you enjoy flipping burgers for $10 an hour.
A lot of people don’t, but they don’t have better options. A study by the California Policy Lab found most workers who left low-paying jobs in restaurants and hotels ended up in the same industries.
“The fact that workers from the hardest hit sectors in the pandemic typically find jobs in the same sectors may be hindering the path to recovery, especially for low-wage workers,” the report noted.
If you fall into that category, you need to be extra careful when it comes to dealing with debt, especially credit card debt.
The Return to Credit Cards
The pandemic initially had an unexpected financial silver lining. People were cooped up and unable to spend as usual, yet many were getting stimulus checks or other financial breaks.
That allowed Americans to pay off a record $83 billion in credit card debt. But that silver lining has faded as normalcy returns and government assistance programs subside.
Revolving credit balances reached more than $1.04 trillion by the end of 2021, the highest since the pandemic started in 2020.
Know the Cost of Quitting
If you decide to go Johnny Paycheck, you hopefully have a better-paying job lined up and can continue or improve your current lifestyle. If you’re uncertain what your income will be, make doubly sure you have a handle on your expenses.
Add up things like mortgage/rent, transportation, food and utility bills. Don’t forget insurance costs, which averaged $7,739 a year for individuals and $22,221 for a family in 2021, according to the Kaiser Family Foundation.
Those items tend to be constant and impervious to belt-tightening. So where can you really cut expenses if you want to quit your job?
Escape Credit Card Debt
The average credit balance was $5,525 in early 2022, according to Experian. With an average interest rate of 16.3%, it would take 16 years to pay that off if all you made was the minimum monthly payments. You’d pay almost $6,500 in interest.
And many people are paying a lot more than the minimum interest. According to Lending Tree, about 34% of credit card users were paying between 20%-35% interest on their credit cards. That’s a lot of debt if you don’t have a job to pay it.
The scary news is that interest rates are only going to climb. The Federal Reserve is expected to hike rates three or four times in 2022 to battle rising inflation.
Basically, credit card interest rates are creating huge holes in any budget. One way to escape is with a debt management plan offered by a nonprofit credit counseling agency.
The counselors at nonprofits work with creditors to lower interest rates for a client to around 8%, which produces considerable savings each month. The counselors help create an affordable monthly budget that includes room for payment on credit card debt.
The debt management program consolidates monthly bills into one payment, which is lower than the combined total of all those separate bills you used to have to deal with.
Succeeding with a debt management plan takes time and determination, but it was working for consumers long before the pandemic.
Now that the Great Resignation is here, such a plan could really help you walk out the door.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].
- Fox, M. (2022, January 10) 40% of Americans with credit card debt don’t know their interest rate, study shows. Retrieved from https://www.cnbc.com/2022/01/10/40percent-of-americans-with-credit-card-debt-dont-know-their-interest-rate.html
- Sull, C., Sull D., Zweig, B. (2022, January 11) Toxic Culture is Driving Great Resignation. Retrieved from https://sloanreview.mit.edu/article/toxic-culture-is-driving-the-great-resignation/
- Hayes, B. (2021, December 8) Neutralize Higher Health Insurance Premiums in 2022. Retrieved from https://www.entrepreneur.com/article/410464
- Giovanetti, E. (2022, January 18) Credit balances spike as Americans become increasingly reliant on credit card debt. Retrieved from https://www.foxbusiness.com/personal-finance/credit-card-debt-balances-grow-federal-reserve