Many people have successfully started new businesses from their homes and have done so while still working a 40 hour work week. Although this may be time consuming, it is well worth the effort. So when does that second stream of income make it possible for you to quit your day job?
In a recent interview with the co-founder of MoneyCrashers.com, Andrew Schrage gives us some suggestions.
Tip #1 – Get Out Of Debt First
The most important debt to get to zero is your credit card debt. You don’t want to be making payments on past expenditures as well as unnecessary interests charges. This is a good rule of thumb to follow even if you aren’t considering quitting your day job. For other types of debt like auto loans, school loans and home loans, try to reduce those debts as much as possible. The least amount of any kind of debt is desirable.
The psychological pressures that debt causes will take away from your optimal performance in your work towards building your new business. There are so many challenges that come with starting a new business that you want to clear your slate of debt as much as you can. Stress can lead to making bad decisions that can cripple your company’s future.
Tip #2 – Reduce Your Monthly Expenses
Your focus needs to be on needs as opposed to wants. Self deception regarding differentiating between these two categories gets many people further into debt and hence further into stress. Getting back to basics really helps you build self confidence and your bank account at the same time. If you want to make a new year’s resolution out of this, your goal could look something like this: “Lose Weight. Gain Wealth.”
Tip #3 – Set A Goal
Your main goal should be creating a financial cushion for yourself. Have enough set aside to cover 3 to 6 months worth of living expenses. When your business is bringing in enough money to cover your monthly expenses and give yourself a little breathing space, you can consider quitting your day job. It’s all about minimizing your risks.
There are situations that will make following all these best practices difficult. You may have been laid off your job in which case you will have to rely on whatever resources you do have.
Tip #4 – Outsource As Much As Possible
One of the biggest mistakes new business owners make is thinking that they have to do all the work themselves because it saves money. Letting go of some of the jobs that other people can do may be a strategic move. Freeing up your time can to focus on overall business growth can be profitable in the long run.
Tip #5 – Have A Working Business Model
When you decide to quit your day job, you have to have a working business model that is bringing in money. Never jump ship before this is in place if you have any say in the situation at all. Future investment partners will be attracted to your business if you can show this model to them.
Any changes you make that affect your monthly income need to be taken seriously. Although you can’t plan for everything, sticking to these basic five tips, will at least help guide you in making better decisions for yourself and your new business.