Do you love your job? Have you ever thought about quitting your job and following your dream? Don’t do it unless you think it through first! We are all in unique situations and there are many variables to complicate the equation. If you are in your 20s, single, and in good health, then you can take much more risks than someone like me. I am getting close to 40, married with one kid, and have a mortgage. At least I don’t have any credit card debt, car loans, or student loans. There are many 40-year-old men with all of the above who is stuck in a job he doesn’t like. When you are older and have more financial obligations, it will take much more planning to quit your job and follow your dreams. Here are some of the things that you need to plan for.
Health care is a huge problem in the US. When your employer offers health insurance coverage, you don’t think about it much, but when you don’t have a job, it can be a huge problem. As we get older, we will need more health care and it will get more expensive and difficult to obtain. I found out how difficult it can be when I tried to obtain health insurance for my mom. As for me, Mrs. RB40 has a good plan from her job so I’m planning to jump on that. See JD’s struggle to get health insurance at Get Rich Slowly.
Can you make the finances work and for how long? Most financial experts recommend 3-6 months of emergency saving. If you are planning to quit your job, this is not enough. Can you start making money right away after you quit your day job? If not, then you will need some kind of supplemental income while working on your dream. I kept track of my cash flow for about a year now and most of the time, we had a surplus. Last month, we had a negative month for the first time in 2012, but I’m not panicking because we have enough liquidity to cover the $29 short fall in April. Even if we average $1,000/month shortfall, we can last 50 months before having to go back to work because we are maintaining a $50,000 emergency fund at the moment.
It is important to figure out the time frame for your dream. Suba at Wealth Informatics is giving herself 2 years to make self employment works after she quits her job. She plans to go back to the corporate job if it doesn’t work out in that time frame. I think it’s a great idea to give yourself a time frame to pursue your dream. It will help with the financial planning as well. I’m planning to be a stay at home dad/online entrepreneur after I leave my cubicle job and I’ll have about 3 years to see if it will work out. Once the RB40 kid goes off to school, I can work on other self employment ideas or go back to a corporate job as a last resort.
Future Financial Needs
Retirement and saving for a college education are the two big items for us. You can put off these for a few years, but you can’t ignore them forever. Mrs. RB40 will continue to max out her 401(k). I’ll put retirement saving on pause for a few years. Once we are comfortable with our monthly cash flow, I’ll start back again. We will also continue to save for college as much as we can. We can always sell the rental home to pay for college if we really need to.
An Action Plan
What will you do after you quit your day job? It is best to have a plan of action before you burn your bridges. Kevin at Invest It Wisely is working on his websites, a book, and an app. He didn’t start these entrepreneurial ventures after he quit his job. You can bet he was already working on them before he handed in his 2-week notice.
Is your partner on board with this? This is extremely important. This kind of career transition is challenging and you need your partner’s support for any chance to make it work. If you are thinking about self employment at all, then you should start working on your partner too. The family may need to downsize or make other changes to make it work. Here are some tips from Mr. Money Mustache on selling the dream of financial independence.
As you can see, it is much easier to go it alone if you are young and have less financial responsibilities. My friend Alison quit her office job, started her own yoga business and became a full time yoga teacher with very little savings when was in her 20s. It will only get more difficult as you get older to quit your job and pursue your passion. I’m not saying it’s impossible, but it will take a lot of planning and saving up to do so. Do you ever think about leaving your day job to pursue your passion? What is stopping you?
Update: Don’t Quit Your Job Until You Read This Book. If you can stick it out a little longer, read this book and it could help you get a severance package.
For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.
Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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