You see influencers on Instagram snapping photos of their decadent lunches before cruising on a sailboat to the next island. You see startup founders taking ski trips with potential investors and bloggers travelling around the country in an RV van to meet up with readers.
While quitting your day job to pursue full-time entrepreneurship seems like #TheDream, it’s not nearly as glam once you take the leap.
Most of us who quit our 9 to 5 jobs are searching for more freedom and flexibility, but we’re quickly met with uncertainty, especially in our finances. But many times, the sacrifice comes with a big payoff (literally).
With big excitement comes big risk, so it’s important to take a deep look into your current financial situation to see if you’re truly ready to quit your job. The more financially stable you are going into your decision, the more at peace you’ll be when putting in your two week’s notice.
So let’s talk about how you can set yourself up for financial success before you quit your job.
WHAT TO DO
Have a plan
First, do you have a plan?
No, not just a strategic business and marketing plan, although that’s important too. I’m talking about a full, unbiased analysis of your current financial situation.
It’s easy to get caught up in the fantasy of taking the leap, but looking at the hard numbers will serve you well. And it doesn’t have to be as scary as you think.
Once you put the numbers down on paper, you’ll be able to see a clear picture of what needs to happen before you quit your job. You’ll go into the decision feeling financially stable rather than wondering how you’ll make it through the first few months.
This financial analysis will come in handy when you start to set a realistic timeline of when you’ll be ready to quit your job. For some, their timeline may be a year. For others, it may be within a few months.
Start your business as a side hustle
Are you waiting to start your business until you’re able to leap into it full-time? With so many benefits to side hustling, you may want to start sooner than you think.
By testing the waters and experimenting while you still have a day job, you’re able to take bigger risks and build a dedicated audience. Building a business from scratch takes time, so it’s better to start now than wait for the perfect time when everything aligns just right.
After all, why wait to start something you feel passionate about? Turning your passion into a side gig gives you the best of both worlds when you’re working a day job. Generating extra side income while setting up the building blocks of your business is a win-win!
Instead of your job being the thing that keeps you from pursuing your passion, it becomes the thing that helps you pursue it. How? By giving you the security of a consistent paycheck so you can focus your energy on doing what you love during your off time.
Assess how much income your business needs to generate to make minimum debt payments.
Having a clear understanding of the minimum payments you need to make will help you better assess your financial situation. When you quit your job, you don’t want to be worried about making your minimums, which would increase your debt.
Once you’ve seen real results and can put a number down for when you’re financially ready to leap, you’ll have a plan to help you get there.
Have at least six months of expenses saved before you make plans to quit your job.
This includes business and living expenses. Approaching your finances holistically will help you best plan for business success.
To know you’re covered for the first two quarters of business will help you free your mind to think “What can I do to grow my business?” rather than “What can I do to pay my next bill?”
Do your business finance homework
When you start a business, you become not only a student in entrepreneurship but also in finance. To run a profitable, sustainable business, you need to know the dollars and cents behind it.
When I decided to turn my blog into a business, I didn’t take the numbers seriously enough. I told myself that to be successful, all I had to do was exercise my passion and creativity. Well, you can guess how well that served me. (Hint: not so well!)
It wasn’t until I dove head-first into my business finances that I came out with a successful business. I updated my client onboarding and invoicing systems, did my own yearly taxes (and learned a lot), raised my value-based prices, and got comfortable with talking about money.
By taking the power away from the “mystery” of finances and putting it in my own hands, I was able to take full reign of my business and turn it into a profitable, sustainable career. I know you can do the same, but it starts with understanding the numbers.