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Considering Self Employment? Here’s What You Need to Know

self employment

Last week I introduced myself and told you a little bit about me, including why I decided to quit my job and become self employed even though I still had a lot of debt and little in savings.

It was a risky move to be sure. But in the comments a reader named George told me that he made an even riskier move (in my opinion) by quitting his job without an exact plan or any revenue coming in. He also asked some follow up questions about my decision to become self employed. Here’s what he said:

Similar to you, I quit my job to pursue my own business about a year ago. However I quit before I had any revenue coming in. There are times when I wonder if I left too early.

I’d love to hear your thoughts on how people can evaluate what the right time is to leave the full-time job. How did you know when it was right for you? Was it when you had enough side income to cover your daily expenses? Were there other non-monetary factors? Would you quit without an idea of what you want to pursue (like people who travel the world while trying to figure something out).

These questions are the basis for today’s post, although I have to admit that I borrowed some of my answers from an awesome speaker presentation I heard from Tess Vigeland when I was at FinCon15. 🙂

When is The Right Time to Leave Your Job?

This was the opening line during Tess Vigeland‘s speech at FinCon and I loved her answer, “If you are asking yourself when it’s the right time to leave your job, the answer is now.”

Her point was simple. If you’ve already been pondering leaving your job because you are unhappy or you want more from life, then you should leave your job as soon as possible.

Of course, you need to be financially prepared before leaving your job, but that doesn’t mean there will ever be a “perfect time” to make your leap.

Recommendations from “experts” include doing things like having 12 months of expenses saved up, having debt paid off, and more before you leave you job. But there are times that those things aren’t possible.

In my case, I decided to leave my job with over $16,000 of consumer debt, a mortgage, and little in savings, but I did have more than and idea of what I wanted to do after quitting.

Building a Business While Working Full-Time

Instead of following the path suggested by Vigeland and other experts, I took a different path. Many of the experts make the suggestion of being financially secure before quitting because they assume you’ll be taking a hiatus to figure out what you want from life and a career and will likely be earning little (if any) income while you figure things out.

However, there is another option. Myself and many others in the personal finance community who have pursued self employment have done so by building a business while working full-time. This has allowed us to gain knowledge, experience, and a clientele before quitting our jobs. We didn’t quit without a plan, instead we quit with a side business that we knew could support us after we made the leap.

Personally, I hadn’t quite gotten to the point that my business had fully replaced my day job in terms of income before I quit my job. I had gotten within about 20% when I pulled the trigger and gave my notice at my job. However, I had the confidence in my business and in myself enough to know that if I put the 40+ hours/week that I was gaining back by quitting my full-time job into finding new clients, I could easily increase my earnings enough to cover my shortfall.

It’s About Taking a Calculated Risk

Long story short, I made the calculated risk of quitting my job without having a large emergency, with quite a bit of debt, and without having fully replaced my income, but I had a plan and I knew the risks. I also had a back up plan and I knew that if push came to shove, I could find work from other sources in only a day or two if I wasn’t going to be able to pay my bills from my business income alone.

Would I recommend my path to everyone? ABSOLUTELY NOT! It’s not for the faint of heart. I spent much of my first week of self employment stressed, scared, and crying. I was overworked from having had little sleep for months while I was building my business and working full-time. However, I knew I never wanted to go back to working a job I didn’t enjoy and I used that to push me through those tough few weeks.

Now I’m earning nearly 3 times what I was at my full-time job. I put in more work hours too, but I genuinely enjoy what I do and I love working for myself. Plus the unlimited earning potential of being self employed has allowed me to speed up my debt progress and I should be credit card debt free in just a few months.

There’s no exact plan that will work for everyone when it comes to pursuing self employment, and it’s also not the right decision for everyone. There are benefits to choosing traditional employment instead of self employment. In the end it’s about making a plan so you can pursue whichever path in life makes you happy without putting yourself into a financial hardship.

For those of you who’ve pursued self employment, when did you know it was the “right time” to quit your job?

About Kayla Sloan

Kayla is a mid-20s single girl living in the Midwest, USA. She is focused on paying off her consumer and student loans, while simplifying her life and closet. You can join her on her journey at ShoeaholicNoMore or follow her on Twitter.

13 comments

  1. Hey Kayla, thanks for the shout out!

    It’s interesting how perspectives can be so different from person to person. After reading your story, I consider your move to be much riskier than mine because as you said, you did it while carrying debt, mortgage payment obligations, and little savings.

    I left my job after I had paid off all my student loans, accumulated decent savings, and had a couple options for side hustles (not passive cashflow ones tho). I did have a plan for what type of business I wanted to pursue but I didn’t have any incoming cashflow when I left. I do wonder whether I could have built my business while working a full time job like you did…getting within 20% of your regular income is pretty impressive.

    I see 2 different examples here for knowing when it’s the “right time” to pursue self employment:
    1) Getting to the point where you’re able to replace or almost replace the job’s pay
    2) Having little to no debt obligations / decent savings / side hustles to float as you pursue your next step, whatever that may be.

    • They both carry their own risks for sure. I agree with your bottom line, it looks like those two options would be the best ways to go about quitting your job to pursue self-employment.

  2. Yeah, quitting without a safety net is a pretty terrifying idea to me. On the other hand, freelance writing in the blog community — while not easy — is a slightly easier way to build a network quickly. Yay for connectivity!

    Glad it worked out for you, but I still don’t envy your stress levels with so many deadlines.

    • Surprisingly, I thrive when I have multiple deadlines and things to get done. My previous job was one that was stressful (due to co-worker relationships within the workplace) and yet boring due to such a repetitive and non-creative nature. I’m so much happier now even though it was VERY scary at first.

  3. I quit after finally snapping one day. It was a Saturday and I was working with some really miserable people and I had finally had enough. I had been planning it for months but all it took was one bad day to push me over the edge!

    • That must have felt amazing – being able to say “no way” and quit when you’d had enough. You had done a lot of work beforehand to get the point that you could that though. It’s nice to have the financial security to quit a job (or a client now) if we want.

  4. I sometimes entertain myself with thoughts of when I’ll quit my full time job but I know I’m not ready for that at all. I don’t have enough savings or investments. Plus, I enjoy working at my job.
    However, I am starting to look into other income streams so my financial situation won’t be 100% tied to my job – you never know what’s going to happen.

    • I’m so glad you are building other income streams even if you don’t plan on leaving your job. You are absolutely right, you never know what will happen and it’s good to have more than one income stream in case you lose your job.

  5. Right now, I feel I am not ready yet to be self-employed. But, I am planning to be one in the next few months so that I can enjoy all those benefits of being self-employed. I know that it has more advantages than its disadvantages. And, what I like about this is that I can take care of my family and I have control over how much I earn.

  6. I go back and forth on whether I would recommend that people start immediately with a self-hosted setup or just get started with blogger or wordpress. It depends what your initial goals are, but if you’re simply interested in blogging and don’t really have plans for making money yet I actually think I lean towards the latter, with the condition that you decide relatively quickly whether blogging is something you’ll actually keep up and if so, make the switch within a couple of months. I know that when I started blogging I just wanted to write. Dealing with the setup required with a self-hosted site would have frustrated the shit out of me. After a few months I knew that I wanted to stick with it so figuring out the technical side of self-hosted was worth it to me. I could see the arguments from the other side too though.

    • I would then recommend going with the free WordPress.com setup and not Blogger. The reason is it’s easy to transfer a free WordPress.com site to self-hosted WordPress. It’s a nightmare now to do a blogger to WordPress transfer. The low cost of entry to self-hosted is why we recommend that off the bat. Paying for a service holds you more accountable to use it than a free one.

  7. Nice Article!
    I think that you forgot to clarify tax issue.
    I consider my spare bedroom as my home office, so any trips I make to the bank to deposit checks, etc are deductible as are any meals I share with “clients” where business is discussed. As long as you keep receipts and are well documented I don’t see how the IRS can say what you did/did not discuss at business meetings…
    I’m left bookmarking this as a reference for clients….Thanks for sharing!

  8. I salute those people who are self-employed because they took that leap of courage and embarked in this type of risk move. I know it’s 50/50 and success rate depends on the person actually. But, when do you know that you made the right decision?

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