When Can I Quit My Job?
Psst! This blog is a snippet from Module 9 of Self-Employed School. In the course, we cover financial literacy more in depth to help you make the most informed decision regarding your employment. We also cover listening to your intuition as well as an empowering tip on how to make the transition from living off your employment income to living off of your business income.
One of the most exciting questions when starting a business is, “When can I quit my job?”.
There’s so much empowerment behind it, but waiting for the “when” to become “now” can certainly feel exasperating. After all, you’re likely maintaining full-time hours on top of growing your business well into the night and weekends. Starting a business is thrilling but exhausting!
Quitting your job is a heavy decision, and the strength of your business is heavily reliant on it. Quit too soon and your business may not have enough money to support you, hang on too long and you risk missed opportunities.
But there will always be more opportunities, and nothing is worse than stressing over money and having to apply for another job after you thought you’ve permanently traded employment for self-employment.
So here are five things I recommend having in place before quitting your job:
Have 6+ months of business expenses saved
Have 6+ months of personal expenses saved
Pay off as much debt as possible
Ensure your business is earning steady income (enough to support it’s bills and pay you an owner’s draw)
Bonus: Have 3-6+ months of owner’s draws saved
There is a lot of saving required! I know you’re probably chomping at the bit to quit your job, but by adhering to the advice above, you’re less likely to need to get a part-time (or full-time) job later because of some extraneous circumstance and you didn’t have money in reserves. There are highs and lows with business, and it can be super unpredictable. (Pandemic, anyone?)
The goal is that when you become self-employed, you stay self-employed. In fact, many of these items overlap with how I plan for the unpredictable in my business.
And if you can, maintain your job for at least a year so you can gain a sense of your business’ busy and slow months. If you’re able to reduce the hours at your job while you transition to self-employment, even better!
Challenge yourself to live on your business income as soon as possible. This will allow you to save your employment income and prove that your business can support itself and you.
And remember, taxes are higher for self-employed individuals! Make sure to set aside money for taxes before calculating your owner’s draws. Taxes are calculated on your profit, which is your income - expenses. (Owner’s draws are not considered expenses.)
What’s an owners draw? An owner’s draw is your paycheck, what you pay yourself from your business account. It’s best to pay yourself the same amount on a consistent basis, like $100/week.
By putting in the patience now, you’ll save yourself so much potential stress later. You’ve got this!
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Just getting started in business and looking for a roadmap? Check out my free Begin Your Business online course. We’ll cover everything from pricing to forming an LLC, assembling your team to getting your first clients, and everything in between.
Been around the business block and looking to grow? My Self-Employed School online course provides a deep dive on topics including website SEO and design, e-newsletters, social media, public relations, and more. It all culminates in creating an easy and effective marketing strategy for your business.
