Perhaps you started a business or made some good investments. The money is starting to pour in. Now it’s time to quit your job right?
If this is you, follow this rule:
Go One Year without cashing a paycheck from your job
Why?
After having a year under your belt you’ll know if you can survive the ups and downs of your new venture. I’ve never seen one that produces the exact same amount of money every month like a job. They all fluctuate.
In that one-year’s time you’re not spending your paychecks. Put them in the bank. Then you’ll have money to fall back on if you need it.
Too many people I know leave their day jobs too early only to regret it a few months later. Don’t put yourself in this situation.
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December 18th, 2006 at 1:16 pm
I got to thinking about how great this would be. I make $58K right now, and I have several ideas for businesses that I would like to start. If I eventually found myself in a situation where I averaged as much money per month, or more, than my day job, how would that really impact me. Well, I could go and change my direct deposit and have my net pay all put inside a savings account that I wouldn’t touch. Wow! $58K put into one savings account over the course of the year.
But, it wouldn’t be $58K. There are the FICA contributions and Federal-State-Local taxes. No big deal, that would still be a sizable amount. But what about benefits? I pay $320/month in insurance premiums… and I don’t plan on giving up my insurance. So, we say not to give up that insurance… fine. But my company pays $1K a month toward the premiums. Hmm. And 401(k), I put 6% into my 401(k), and my company puts in 4%! Then there is my flexible spending account.
Benefits can certainly skew this, drastically. And I would say that you should not forgo the benefits just for the sake of this experiment. But, do some shopping for health insurance and find out how much it would cost you. Then, take that amount of money out of your new operating expenses and add it to the savings account that you are sticking your day job income into.
This is a great idea. I recommend this to people that are considering new expenses, as well. For instance, if you are thinking of becoming a homeowner, find out the total monthly cost you would have to pay to get into the home you want, and take the difference of what you pay in rent and put it into a savings account for at least six months. Remember to include taxes and insurance, and any utilities that may be included in your rent. You can do the same if you want to get a new car (and by “new,” I mean gently used). Figure out how much you would pay for it, and the increase in insurance you would have… and if you are really wanting to be accurate, figure out how much you would have to increase or decrease your fuel expenses. Doing this will give you an extra little down payment, if you are successful.