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Four Things to Consider Before Leaving Your 9 to 5
Tired of that daily grind? We feel you. Before taking time off to launch your own business or passion project, here are four things you should consider first.
Evaluate the Risk
Leaving your 9 to 5 gig means giving up certain things, so make sure to weigh the pros and cons of your current job, including consistent income, paid time off, health benefits, corporate discounts and social interaction. Time off work may also mean taking a break from contributing to retirement savings, which means risking future income.
If your family relies on you to help out financially, you will want to consider their needs and comfort as well. You might feel more relaxed, but your loved ones could be stressed by the added strain on the household budget.
Weigh these potential risks against the possible benefits. Being your own boss gives you more control over your time and could improve your overall happiness, but only if you feel secure enough financially to relax and enjoy your newfound freedom.
Save Up for Expenses
If you’re still on board with ditching the day job, then it’s time to plan for how you will afford it. While the recommended emergency fund if you were to lose your job unexpectedly is three to six months of expenses, you are going to need more if you plan a break from work.
To determine how much money you need to live comfortably, add up all of your monthly expenses. Then factor in approximately 25 percent for taxes. Remember to include extra savings for unexpected costs like medical bills or car repairs, as well as any semi-annual or annual bills such as insurance, memberships and subscription renewals. Look back at your bank and credit card statements for the past year to double-check that you’re not forgetting any recurring bills that could sneak up on you.
Now that you have a baseline income, multiply that by six.
If you just dropped your coffee, let us say that again. Calculate your current expenses plus emergency savings and multiply that by six. For most of us, that’s a lot of money, but it’s a reasonable amount to cover potential losses, difficulty finding freelance jobs or the start-up costs of launching your new lifestyle. In order to build this safety net, consider making sacrifices. You might drop nonessentials like gym memberships, cable TV service or music streaming.
Before quitting your job, put yourself on a “practice budget” to try out what if feels like to live without a steady paycheck. Every little bit you save adds up and will help you focus on your new life, rather than worrying about how you will pay your next month’s rent.
Be very careful about cutting your safety nets, like insurance, or taking loans and withdrawals from existing retirement savings. You might be ready to leap into self-employment now, but when you take money and insurance away from your future self, you could regret it.
Structure Your Time
Congrats, you now are in control of your own schedule. While it may be tempting to turn on Netflix and binge watch Friends for the 27th time, we recommend creating a game plan. It’s time to set some goals.
Take the time to visualize success. How would you spend your perfect day? Set calendar reminders; give yourself deadlines; treat yourself like your own employee. If you were your boss, what would you think is a reasonable output for a day’s work?
One advantage of working independently, is that you can structure your day around when your energy levels are highest. If you are a night owl, maybe you won’t start until the afternoon and work through the evening. It is important to know what your perfect day will look like so you won’t spin your wheels and get sidetracked or distracted.
Set Achievement and Income Goals
A dream is usually one of the reasons why people consider leaving a day job. If you have one big goal, break it down into both short- and long-term milestones to measure your progress. These targets ensure that your work aligns with your values and your larger vision for your life.
Short-term goals help you to plan each day so you can feel productive and motivated. It might sound great to spend all day in your pajamas, but unless you are accomplishing something, your time off could feel like a dead end rather than an opportunity.
In addition to achievement goals, you likely will have income goals. How much money do you want to make in a typical day, week and month? If you currently receive an annual salary, do the math to calculate how much you currently earn as an hourly rate and determine how much you would have to work on your own to earn that same amount (or more, if that’s your goal). Use these income targets when you set your fees with clients, or when you determine how much to charge for your products.
Take the time now to write down why you want to take a break from your job and start mapping out the details. Even if you’re not ready to take the leap just yet, thinking through the process might plant the seed for a future career shift.
Good luck, and as always, we’ve got your back. Leave a comment on the On Your Own Facebook page to tell us how you’re doing. We’d love to hear from you!