Are you spending your vacation days working our your side project? Nights and weekends too? Most anyone who has ever started a new business as a side project dreams of the day they can quit their day job and focus on 100% of their time on their entrepreneurial pursuit. I was lucky enough to be able to make that same transition a few years back. Here are a few things to consider when contemplating “the leap”.
Can You Afford It?
This is the most obvious and critical question of all. Money isn’t everything, but it sure is handy for paying the bills. I’m assuming that if you’re getting ready to quit your day job that you either have enough income through the new business to support yourself or that you have enough savings to live comfortably for several months. The most difficult part of leaving a job is seeing that regular paycheck disappear. Having a husband/wife and kids compounds the issue even further. How does your significant other feel about the risks you’re considering? Are they comfortable with the increased amount of uncertainty that you’ll be bringing into your lives?
What About Health Insurance?
If you’re used to having health and dental insurance through your day job you may be in for quite a shock when you see how much it costs when you’re paying for it individually. The cost of health insurance is going to depend on several things: your age, general level of health, location, family situation, and more. You should consider how often you visit the doctor or tend to get sick when thinking about whether or not health insurance is a priority. If you have kids then you’re more likely to need coverage. Before quitting your current job you should inquire about COBRA coverage and costs. COBRA gives you up to 18 months of coverage through your current employer’s plan. You will pay 100% of the cost, but you don’t have to worry about finding insurance right away. You can expect this cost to be at least $500 for individuals and $750 for families monthly. You’ll have the option to choose just health insurance or health and dental coverage.
What About Retirement?
Starting your own retirement plan (Roth IRA is the way to go) is easy enough. I recommend rolling over any amount you have in your employer’s retirement plan into your own account so that you can manage it yourself. Depending on your age you may want to limit the amount of money you put into your IRA, just to give you more cashflow flexibility for a few months after the transition.
Make A List of Pre-Requisites For Quitting
Something I did that I highly recommend for everyone is making a list of all your pre-requisites for quitting your day job. The list should include all of your concerns and requirements. Make the list at least 3-4 months ahead of time to give yourself enough time to thoroughly think everything through. Once you get to the point where no major concerns remain on your pre-requisites list then it may be time to act. Some examples of things to be on the list are:
- Have $XXXX saved and available for living expenses
- Have new retirement accounts created
- Research insurance costs
- Have new business incorporated
- Have home office ready (or research new workplace)
DON’T Take a Vacation First
I really hope that you don’t decide you need a vacation before you start working on your new job full-time. The best thing that you can do is to jump in with both feet and hustle as hard as you can right from the start. I remember being so passionate and excited to start working full-time at MediaLeaf that I couldn’t possibly think of doing anything else or delaying it any longer. If you would rather take a vacation or a break than get started with your new venture then you may have the wrong motivations and should reconsider decisions. For those of you that have successfully made the jump, what are your experiences? Any advice for others looking to do the same thing?