Well, I know all about that because I quit my last day job four years ago. Being that I was far more risk averse back then, there are certain things I did to prepare financially. These things also seem to be pretty common across the board as I ask colleagues what they did to prepare.
Make sure you have some money coming in from a business already.
If you don’t already have a business that is bringing in some money, don’t quit your job. In order to prepare financially, it would be nice if you already have some sort of income from your business.
Trust me, if you quit without having money coming in already, you will be right back at a day job in a matter of a few months. Additionally, you wouldn’t want to quit without knowing that you have a viable business idea that you can grow over time.
In my case, I already had money coming in from some freelance writing and coaching. I knew that my job was simply getting in the way of being able to grow my business. That’s a far better position to be in than to quit without a game plan.
Make sure you have some savings in the bank.
Speaking from experience, the first couple of years of business are typically rough. That’s why in order to prepare financially for self-employment, you’ll want to make sure you have some savings in the bank.
Because I’d been making money on the side for some time, I was putting all of that money into savings for that moment when I finally quit. It came in handy that first year of full-time self-employment.
Pay off your consumer debt.
You know what debt does? It keeps you from living the way you want. As a couple of my coaching clients, The Debt Free Guys, say “Credit card debt ties your money to the past.”
It will be much easier to take the leap into full-time self-employment if you pay off your debt. That way you free up some money. There’s also less pressure in terms of bills.
Granted, I’m only speaking of consumer debt like credit cards because they serve absolutely no purpose. Obviously, things like student loans and a mortgage are a bit of a different story. In those cases, make sure you have enough coming in to continue paying off those debts.
Keep your expenses low.
In order for me to prepare financially to have quit my job, I made sure to have insanely low living expenses. I lived with family, never bought a car and rarely spent money on myself when I was getting a business off the ground.
Does it suck to do these things? Yes. But it’s absolutely worth it in the end. Because I did this to prepare financially, I am now able to live the way I always wanted to with room to grow.
[Related: Put on Your FP&A Hat for a Financial Review]
