Many of us dream of starting a business. Or, perhaps you are ready to quit your day job and take your side hustle full time. No matter your ambitions for your dream of working from home, or working for yourself, there is a good chance that you will need to fill a revenue gap associated with the end of your regular job. Are you financially ready to take the plunge? Here are some things to consider as you decide whether you are financially ready to get out of the rat race:
Do You Have an Emergency Fund?
If you decide that you are going to set up a home office and start working from home, or start your own business, you are going to need some sort of income while you build your business. If you already have a side hustle going, this might be easier, since you already have something coming in. However, you will still probably need to make up the difference if your cash flow from your side business isn’t quite up to the level of your expenses. Figure out how long your emergency fund is likely to last, and make a plan for using it as you get started in your new life as an entrepreneur.
What About Benefits?
One of the things you will quickly discover that you miss is the fact that you probably get benefits at your full time job. The biggest thing is the health insurance. Consider where you will get health insurance for your fledgling business. At the very least, you will need to make sure that you can get health insurance for your family. Consider high deductible plans, group plans and other options that might be cost-effective. If you have a working partner, you might be able to keep that insurance coverage and not have to worry about it for your business.
You will also have to remember that you will now be paying both sides of the payroll tax. You will now be paying double the payroll tax you paid before, since you will have to pay the employer side as well as the employee side.
Do You Have a Plan B?
Consider, too, having a Plan B. In some cases, you might need to get a part time job for a more regular income stream as you build your business. Perhaps you can find ways to cut your expenses down so that you don’t need as much money to keep your household running. Could you sell your home if you needed to? How much stuff could you sell if the need arose? Consider alternatives, just in case your emergency fund runs out before your business takes off.
Just Going For It
Alternatively, you could just go for it. I actually ended up just going for it. When I started freelancing, right after grad school, I knew we had to make it work. My husband’s student loans supplemented for a couple of years, but it was pretty much do or die for me. My husband and I knew we wanted me to stay home, and we needed money. So I just went for it and never looked back.
Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.