When I moved from a full-time job working in a hospital to full-time freelancing, I was completely unprepared. I received “consent” from a new anchor customer (someone who was committed to bringing you a stable business) and the next day I sent out my two-week notice. Along the way, I learned a lot about the right ways to get ready to work full-time freely. Do you want to break up with your owner and take the leap to self-trading? Here’s how you do it:
Make a completely new budget
Even if you have lived on budget money, things will change when you are self-trading. Long before you make the switch, sit down and outline any changes to your costs that may occur while working full-time freely. This includes paying out-of-pocket for health insurance, quarterly self-employment taxes, hiring accountants, and any supplies or equipment you need to get your work done.
Live on your free income
Once you’ve budgeted, start living on what you’re doing as a freelancer. Can you earn monthly, if your income does not increase immediately after leaving work? Can you depend on your customers to pay you on time? Here’s what you need to know before giving up your full-time income.
Save from 3 to 6 months of cost
Even if you have great clients, give you a lot of work and always pay on time, it’s important to know that the world of free work is inconsistent. You may lose customers you once thought would never leave you, or the checks you were waiting for may be lost in the mail. Be prepared for changes in your income. While you’re living on your free income, put everything you’re doing in your daily work into an emergency fund.
Set up an office
Working at your kitchen table can work for you at night and on weekends, but when your full-time work is done at home, you will need a separate space to work. Before you quit your job, arrange an office in the house, whether it’s a living room corner or a small desk in the kitchen.
Plan your future
Self-trading may be a dream, but there are some drawbacks you have to consider. One of the biggest obstacles I face is planning my future. When you no longer have 401k suitable for employers, can you save enough for your retirement? Consider meeting with a financial planner to talk about the best way to approach this before you quit.