How Much Money Should I Save Before Quitting My Job?
Quitting your job is scary. You’re essentially walking out of the most “comfortable” position you’ve ever been in financially and from pretty much everything you’ve considered “normal” about making a living over the past few years.
You’ve made friends at work, learned a lot, and have been challenged beyond belief.
At the same time, leaving safety also represents that freedom you’ve been yearning after for years.
Many people think that leaving your cushy day job is asking for trouble. And they are right to a degree – by choosing to leave your job, you’re up against one of the more difficult things you can do in life…both mentally and emotionally, as well as financially….and you’re doing it voluntarily – you badass
And if you are the said badass, you have been dreaming about when you will walk away from your current job for the last time in ecstasy.
1. Save at least six months’ expenses
living in your parents' house or constituting a nuisance by squatting with a friend or another family member is your idea of a good financial backup plan, failing to figure out how you'll make ends meet after you quit your job could make you even more miserable than staying there. So before taking that leap, be sure to have a solid plan for paying your bills after you ride off into the sunset.
This is especially true for the bills that will keep your new business afloat.
Plan to bank even more money before you quit your day job, since new businesses often take a while to turn a profit, and may also require additional unexpected startup costs.
The golden rule is to save three to six months' worth of your fixed living expenses before leaving. Having those reserves will give you financial comfort when leaving a job so that going forward you can pursue the notion of living your true values.
Depending on the nature of your business, you may have to save up to 6 - 12 Months' worth of your fixed spending expenses and also the capital for your business.
Know exactly how much money you need to afford your life and Business
Start by calculating the exact amount you earn after taxes and don't forget to deduct any automatic transfers or other funds. Next, spell out your monthly expenses — creating a spreadsheet might help. Include your bills and any ongoing debts that must be covered. You can start from your average, day to day expenses.
For example, if I made note of how much I spent every day, wrote it down at the end of the day. It varied from N1,000 - N2,000 for each day. I did this for 14 days, added everything together and divided it by 14 days. I got N1,650. I went ahead to multiply it by 30 days. That means I spend an average of 49,500 per month. I add an additional N10,000 for miscellaneous and emergency.
For my basic living, it means I will need N60,000 multiplied by 6 for the next 6 Months. That is N360,000.
Now I need to calculate how much I need for my business. For My Digital Marketing, I need a startup fee of N150,000 and monthly N50,000. That is a total of N450,000.
Hence, in order to quit my job without worries, I would have saved up a total of N810,000.
2. Plan to live on (much) less
If a career change is important, you simply can’t “afford” to hold it hostage because you’re resisting a lifestyle change. Financial scholars call this the “hedonic treadmill.” That is, human beings adapt quickly to the achievements and lifestyle advances they make, and happiness peaks as we level off to the new normal.
One minute you’re happy living off indomie and garri noodles and splitting the rent with four roomies; the next, you have an apartment to yourself, a big screen TV and you are thinking of buying your first car. Once we decide to cut back, we soon forget about our happy circumstances in earlier days and loathe stepping backwards.
But you don’t have to travel all the way back. Consider incremental changes: a cheaper apartment, hold off on that new car and phone. Spend fewer nights and lunches eating out. (You should also approach hitting the bar with caution, though some sacrifices are easier to make than others.
The more you can cut back, the further your savings will go; the same amount of money required for six months can last perhaps twice as long and give you more breathing room.
3. Try Freelancing
Just because you've saved six months' worth of income doesn't mean you should chill for six months before generating new income. You can add to your stash without making a huge commitment by freelancing. In fact, we recommend you to try With Affiliate Marketing, you do not need to spend too much time on it, you get to make some extra bucks and focus on your business too.
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