How much money you should have before quitting your job

How much money you should have before quitting your job

Feeling done? Here’s how to prepare yourself financially

BY Anita Siek, June 14, 2018
 

Whether you’re in the early-stages of starting a business or right on the cusp of calling it quits on your 9-5, ensuring you’re financially ready to make the somersault out is a crucial step.

Having grown Wordfetti from the mighty side-hustle – it was that cheeky bugger Maslow and his Hierarchy of Needs that gave me the ultimate benchmark of readiness, seeing me through the first few months of solo flying. Here is a no fluff approach to what it looks like:

Have enough to cover your most basic needs

The most basic tiers on Maslow’s pyramid are Safety and Physiological – and this is a given, because they allow you to service your most important asset – ahem, spoiler alert, that’s you, Chief Income Earner.

They’re ongoing costs that cover the basics: a bed for rest, shelter, nutritious food and clean running water. Basically: paying your rent or mortgage, energy and grocery bills – and anything that safeguards your mental health, like a gym membership.

This last one’s a little controversial, sure – but remember, you’re going to be wearing all the hats for a little while, so physical and mental wellbeing = focus, which leads to a world of good for your productivity.

Have enough to cover your most basic expenses

We’re moving up the pyramid here, people.

Like your basic needs, these are costs that recur, but aren’t crucial to your basic survival. Instead, they improve your quality of life and help grow your business, which in turn improves your earning potential exponentially.

Of course, while every situation will vary (depending on the type of business you have and the dependencies – like kids, or significant others – in your life), for me, those things were:

  • Transport (car or public) – which get you to and from client meetings;
  • Phone and mobile data – allowing you to speak with clients or buyers and conduct business development and research;
  • Coffees” – for when you take potential and existing clients out for meetings;
  • Internet – helping you get the word out about your business and do great work;
  • Additional – like childcare – allowing you the crucial peace and quiet to focus on growth, healthcare – budgeting for pre-known conditions, and insurances – for peace of mind.

Top tip: While the upfront costs of these are a requirement, if they’re for business – they’re tax-deductible.

Finally, have enough to cover ‘the optimisers’:

Now, whilst this one is more of a luxury, optimisers play the important role of helping you handle things your time is not best spent on. Not things you don’t like, which is an important distinction, but things that are better off for your business long-term if they’re done by someone more capable or experienced than you.

You might not need these things immediately, but you don’t want to wait too long – and having the funds beforehand means you don’t need to pinch moolah from the kitty down the track.

Some examples of optimisers include, but are not limited to:

  • Freelancers, contractors or employees. If you have existing staff coming with you upon your leap, they always come first – so pop this on the top of your basic expenses bucket;
  • Accountants and/or bookkeepers. Not because you don’t like the math, but because they’re experts at assessing the most tax-effective ways for you operate;
  • Web designers, copywriters (like us!), SEO experts to help you rank to Google gods [*all hail*], photographers to help your products sell, and memberships to networking platforms, like Business Chicks;
  • A business coach. Didn’t Bill Gates say everyone needed one?

The check, please:

Excuse us whilst we print your receipt, ma’am.

Basic needs (monthly):

Mortgage or rent: $1,800

Electricity and/or gas bill: $70

Groceries: $400

Gym: $80

Monthly = $2,350


Basic expenses (monthly):

Fuel: $150

Phone: $100

Coffees: $50

Internet: $100

Additional: Varies, depending on your situation, you’ll need to add this on separately

Monthly = $400

 

Optimisers (monthly):

Again, varying, but mine came to a monthly average of $2000.

All up per month:

$4,750 (+/- depending on your circumstances)

And times that by six (a safe amount of months for you to have everything covered while you find your feet), you get $28,500.

A couple of things you might want to already have bankrolled prior to leaving the 9-5 comfort:

  • Your “big ticket subscriptions”, like your website or e-Commerce store, your email domain, any proposal software and your product costs. Basically, anything your client or buyer would reasonably expect you to have sorted before or when engaging with them. $1,000.

Ps. By paying upfront, we saved 30% vs the monthly costs – with the added benefit of not having to factor it into our basic expenses.

  • Your business insurance and legals, which include professional indemnity, public liability, an ABN or ACN, a contract or terms sheet (if you’re services-based), or a returns/consumer policy (if you’re product-based). If you have a website, a Privacy and Terms of Use Policy are crucial, and all of this can set you back anywhere upwards of $5000.

Note, these costs of course aren’t indicative of everyone’s circumstances. All situations are unique – but hopefully, doing this exercise will help you confidently take the leap with full faith (and closed eyes).

Leaving the comfort of a 9-5 role is scary, I’m not going to sugarcoat it. But don’t let your fear deter you from doing what you really want to do in life (that is of course, if you feel it’s not at your current role). Sure, it’s comforting knowing that fortnightly moola will come, but imagine if what lies in the unknown is all that you have ever wanted… and more? Well. There’s only one way to find out.

Anita Siek is a lawyer turned copywriter and is the Founder and Director of Wordfetti, a copywriting studio that help brands who don’t believe in normal stand out through words. She regularly shares her learnings and tips via social media, find Wordfetti on Facebook and Instagram.

Connect with Anita here.

Read next:

How to get your brand noticed in 2018

Managers deserve to be happy at work too – here’s how

 
 
 
 
 
 
 

Log in

Forgot your password?