I’ve got a plan in place to pull the trigger at the end of this year. It’s equally thrilling and scary.
See, I’m the breadwinner for our family of four – my husband is a SAHD and quit his job to stay at home in the summer of 2013 after our second child was born. That means earning income has been squarely on my shoulders and will for the most part still be going forward.
A Little Background
I only started looking into this crazy world of freelancing and webpreneurship in April of this year. In hindsight, that’s really not that long ago. Luckily, I’ve been able to make some decent progress in the last six months.
I’ve been in the financial services industry for the past eight plus years and after reevaluating my career path at the beginning of this year, I came to the conclusion that I was ready for a change. I just couldn’t see myself (happily) sitting at the same desk 10 or 20 years in the future. In fact, one of the questions that I kept coming back to was:
“If I were in the same place three years from now in my career, would I be fulfilled personally and professionally?”
This is the gist of the question anyway (I think I’ve since thrown it away) and I can’t recall the source. Take a moment to ask yourself the same question. What would your answer be?
I did try to figure out how to become happier in my current career. I proposed a plan to the practice I was working in, as to how I’d like to grow. We began talks on how to make that happen. Along the way though, I realized that even if I were more successful or in a different role in my copmany, it wouldn’t really make me fulfilled. I’d probably make more money and have more control/flexibility, but I’d still be doing the same things that I didn’t like doing now. My passion just wasn’t there anymore.
Defining a New Dream
I do like personal finance, so I tried to figure out what I could do that could bring that into a new career. I’ve always loved to write and have been doing that more as a hobby for the past five plus years. Up until this point, I’d always focused on personal blogs or fiction though and didn’t really understand the opportunities that were out there for a non-fiction web writer.
My Google search brought me to Leaving Work Behind and I started to soak in anything I could from Tom Ewer and his journey into freelance writing. To say he inspired me, is an understatement.
I ended up signing up for Paid to Blog, which is a course written by Tom on how to break into freelance writing. This is honestly the best $50 I’ve spent on my business this year. He taught me step-by-step how to launch a website, format my Hire Me page and start pitching for jobs.
I then subscribed to his Paid to Blog Jobs, which is a paid jobs board. He and his assistant scour the internet for all of the quality writing jobs from a ton of different sources and round them up into one easy to read place. This is the only place that I go to look for new freelance jobs. It saves me a ton of time and I’m able to bid jobs I would have never found on my own.
I have Tom to thank for a lot of my success so far. He had one of his own jobs listed on the job board and I applied. He took a chance on me and hired me for my first paid gig back in June of this year. I also was lucky enough to secure an unpaid contributorship to The Huffington Post, which was also integral to my success so far.
Putting In My Notice
Once I figured out what I wanted to do (become a freelance writer), I knew I needed to start my business as a side hustle, to make sure it was a viable option. I spent April figuring out what it is I wanted to do, May setting up my website/taking Tom’s course and June securing a mentor and publishing my first few articles/getting paid work.
Once I gained some traction (and started making some decent money), I decided I wanted to quit my day job by 5/1/15. Through some changes at work and conversations between me and the hubs, I’ve moved my goal up a bit and put in my notice at work. My replacement has been hired and I’ve started notifying my clients. I’ll be a full-time freelancer after the first of the year – there’s not going back now!
My Plans for 2015
They say you should have 6-12 months of expenses set aside before taking the leap into self-employment. I’ve been quasi self-employed for years already (but with a fixed salary), so I understand how most components will work – we’ve already secured our own healthcare and I’ve been paying self-employment taxes and quarterly estimates for some time.
I’m also fortunate to have a book of business to sell and will be contracting with my current office one day per week in 2015. Between those two sources, I should be able to almost replace my salary for the entire year. This gives me a fair amount of confidence in making the leap. Now, if the stock market would just cooperate!
Being in the financial industry, I’ve also always been accustomed to having an emergency fund or cash reserve set aside. Currently we have 2.5 months worth or so and I hope to have it up to the three full months by the end of the year with my freelance income. Between unexpected medical bills, a recent vacation and out of pocket dentist costs (we no longer have dental insurance), we’ve found plenty of ways to spend my extra income these last few months!
Becoming Debt Free
One of the best things we’ve done in the past few years is to aggressively pay down our debt. We were like any other “normal” couple before the financial crisis hit and had mortgage debt, student loans, an auto note and credit card balances. I cringe to think of what a precarious position we put ourselves in at that point!
Through taking my own financial advice and going through Dave Ramsey’s Financial Peace University a couple of times we were able to reign in our spending and start attacking our consumer debt. Through some hard work and consistent payments over time, I’m happy to say we only have our first and second mortgage left to pay off.
Our plan with a portion of my freelance income is to significantly increase our second mortgage payment and have it paid off by the end of 2015. Then we’ll only be left with our first mortgage – I can’t wait to make that last payment!
Starting 2016 on the Offensive
For the most part I should have income from my former business for 2015. I’m very fortunate to have this safety net in place and basically have a whole year to ramp up my freelance writing and VA work to the point where our family can live off of it.
I mentioned my husband became a SAHD almost a year and a half ago. We never planned on this being the case – in fact, we didn’t think we’d ever be able to live off of one income. After baby number two was born, we crunched the numbers and realized by making a few budget cuts, we could make it work.
Having one of us stay at home and raise our kids, rather than pay for two under two in daycare made a lot of sense for our family. We feel so blessed that this is the case. I’m not going to lie though, sometimes it’s made me a little jealous! No worries, as the changes we’re making should enable me to be with our family even more, plus have the flexibility for us to take the kids to do fun things during the day.
By paying off our second mortgage next year, we’re also going to be putting ourselves in a better place financially and lowering the amount of income needed to pay our monthly expenses. Taking the minimum payment ($700), plus the amount we’d have to earn to net this after taxes, will decrease our take home need by about $1,000 per month. That’s a pretty big number when you think about it!
We’ll Make It Work
I also figure that between my husband and I we have a fair amount of skills. If we needed to make money, because my freelance business isn’t doing well, between the two of us we’ll be able to figure it out.
We’re not too proud to find work in order to pay the bills. Either of us could always go back to work or find a part-time position to make ends meet if we needed to.
What You Can Do
What if you don’t have a practice to sell though? Or you might not have the opportunity to contract with your former employer to replace a portion of your salary. It’s okay, it doesn’t mean that you can’t make the jump too.
I do think it’s prudent to prepare financially before making the jump into self-employment. Some people don’t and have been fortunate enough to be wildly successful – or maybe they used the lack of safety net as motivation to succeed. This is making your own luck.
For the rest of us that want to try and prepare or can’t afford to risk it all, there are some specific steps you can take to prepare. Here are five that I think make sense to consider before taking the leap.
1. Make a Budget
Any individual or family should make or keep a budget. It’s especially important for those of us that are self-employed. If your income is variable, it’s helpful to know exactly how much you need to make as a minimum to keep yourself or your family afloat.
It can be as easy as writing down your expenses on a piece of notebook paper or as extensive as using a software program. Mint.com is a great free way to get started online. Either way, figure out how much income it takes to run your household and figure out if there are any expenses that you can cut in the meantime.
2. Pay Down as Much Debt as Possible
It’s a great idea to work on paying off your debt while you still have predictable income. Start with the lowest balance (quick win!) and challenge yourself as to how fast you can pay it off. Stop charging things, if you can’t pay them off when the bill comes. Have a “no new debts” policy and abide by it.
Every debt you can pay off prior to making the leap into self-employment, is another bill (or sum of money) that you won’t have to come up with from your new variable earnings. It’s a great way to take some of the pressure off!
3. Start Your Business as a Side Hustle
Starting your business as a side hustle is a great way to find out if it is viable. It’s also an awesome way to increase your income and attack any outlying debts (see above).
Challenge yourself to first break even with any start-up expenses (try to bootstrap as much as possible though) and then only incur new expenses that you can pay for from your newfound income stream.
Lastly, by starting your business as a side hustle, you can accumulate some additional savings (see below). The more cash you have on hand, the better!
4. Build a Significant Cash Reserve
As I mentioned above, they say that you should have 6-12 months worth of expenses (not income) set aside before making the leap. You might not get all the way there, but try and accumulate as much cash as you can beforehand.
Cash is king! Having excess cash on hand will allow you to make different decisions, than if you only had credit to rely on as a back up plan. It may be even more important than paying off debt. You always have the option of applying it there if you want to. On the flip side, you don’t always have the option of taking out additional credit, once you’ve paid it off – especially after you’ve become self-employed.
5. Have a Contingency Plan
I mentioned earlier, that I feel like between me and the hubs that we’d be able to figure out how to make ends meet if we have to. I used to waitress and am not too proud to pick up a catering job or apply to a few fine dining restaurants if I need to.
Wade on the other hand is extremely handy. He could go back to work (not our first choice) or he could pick up some side work doing remodels, building decks, etc.
You also should have a plan, should things not work out after you quit your day job. Could you go back to work for your current employer, become a consultant or find another job in your current industry? Remember it’s a contingency plan – not your first choice, but a back-up plan in case things don’t work out how you want them to.
Everything Doesn’t Have to be Perfect First
It would be great if you followed those five steps to a “T.” Reality rarely works out exactly as planned though. I think you should do your best to implement the above (or your own version), but still take the leap when the opportunity presents itself.
As I mentioned, it was my goal to transition 5/1/15. I’m going to be doing it five months sooner than expected on 1/1/15. That’s when it ultimately made sense for me. Would I have liked to have more set aside in cash reserves? Yes. Would it be ideal to have our second mortgage paid off first? Absolutely. But that’s not the case and I’m okay with it.
I feel confident that things are going to work out. My guess is that they’ll look completely different than I’m envisioning, but I’m optimistic that my future as a webpreneur is bright and that I’ll pave my own way. Even if I fail, I’ll have chased my dream and hopefully gotten to spend more time with my family as a result. I’m ready, I’m willing and I’m excited. Wish me luck!
What’s holding you back from taking the leap into self-employment?
Author bio: Gina Horkey is a freelance writer, with a background in finance. She's passionate about designing a flexible lifestyle suited to meet the needs of her young family of four and hopes to inspire others to do the same. She also just released 30 Days or Less, an email course for brand spanking new freelance writers. Please stop by Horkey HandBook and say hello and/or connect with her on Twitter, Facebook or Pinter
Image via Flickr by M.G. Kafkas
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