It seems to be very trendy these days to quit your day job and pursue your dreams and if you’re seriously considering it, here are my top four financial tips BEFORE you leave your 9 – 5.
- Know how you’re going to make money for the next 6 months.
- As much as you dislike your job, boss, colleagues etc. you have to realize that you get a regular pay-cheque and that the moment you leave your job, your income will stop! That’s why the first step is knowing how you are going to make money for the next six months.
- The best way to secure your first six months of income is to be working on your side hustle and develop your biz and generate income from your biz before you leave your job.
- Calculate exactly how much your life costs
- When you have a steady salary it is easy to get by without knowing exactly how much money you spend every month. But once you say good-bye to the extra financial cushion which your job provides, you need to know the minimum amount which you require each month to fund your life. You may even want to calculate two different amounts. One, which is your baseline expenses and another, which includes your luxuries and little treats that you enjoy to spend on if money allows.
- Keep in mind that in order to be a successful entrepreneur you are going to have to invest in your business and you may have some extra expenses that you don’t have today, so don’t forget to take those into consideration.
- Have a plan B with back up savings
- You have to be realistic. Unfortunately, the stats say that 9 out of 10 new businesses fail. Hopefully this won’t apply to your new venture but if your new business does not get off the ground as you had hoped, you need to have a plan B. Plan B can be as simple as having enough funds to cover six months of expenses while you figure out what’s next. Plan carefully and put those funds aside for when you might need them most!
- As part of your plan B, you may also want to go back to work part time, to ensure a steady stream of income while you’re building your new biz.
- Understand what you’re giving up
- Leaving a structured role to build your biz and become your own boss can be the dream life, but there are benefits you may be leaving behind, like health coverage, life insurance, retirement contribution matching etc.
- Health and insurance coverage can be significant and it probably is not something you are budgeting for today, but if you give it up, you’ll need to calculate those costs and factor them into your expenses to make sure you have adequate coverage going forward.
Making a life and career change like leaving your structured career to start your own biz can be exciting and wonderful however you need to be sure that you have looked at the full picture.