I’m a firm believer that a healthy dose of organization and planning mixed in with a little spontaneity is key to anything that you want to do in this world. This is especially true if you’re thinking of dropping that 9 to 5 job to pursue your dreams. This step is vitally important not only to have a clear understanding of where I stand today, but to see what my minimum bottomline will be. From this, I can figure what extraneous expenses I can get rid of and where I need to focus my time, money and energy on.
So how did I do it and what did I do?
Get a hold of my finances and calculate out fixed expenses. I took my bank statements and credit card statements from the past 6 months and pulled them into a spreadsheet like Excel. I then isolated my fixed expenses like rent, car payment, cell phone, internet connection, etc. (any expense where the amount per month does not change). Total them up and average them out per month. This gave me the bare minimum I need to make on a monthly basis.
Calculate out variable expenses. These are the expenses that fluctuate from month to month. Things like getting coffee, getting gas, eating out, etc. are variable expenses. Total them up and average them out per month.
Eliminate or adjust your variable expenses. By calculating out my variable expenses, I saw that I was spending on average $100 per month on coffee alone. I don’t know about you, but I can stop drinking coffee without going too out of whack. That will save me $100 per month. I kept doing this for each variable expense category and figured out if I can eliminate it. Mind you, there were categories that I cannot do without like getting gas for the car or eating. For these items, I figured out on how to reduce the amount of driving I do thus reducing the amount of times I need to fill up. For instance, ride my bicycle to the gym or grocery store. For eating, I figured out I can do more grocery shopping and eat in rather than eating out all the time. If I do eat out, them order something that’s a littler cheaper in price than I normally get…or ordering water instead of the soda or beer.
With this done, I had a good overview of my finances and the changes I need to make in order to stretch my dollar. Was it a good idea to quit the 9 to 5 and pursue my dream job for the next 6 months (preferably you’d want enough for a full year)? For me, the answer was a “Yes!” If the answer was a “No” and I still wanted to pursue my career, then I would have stayed at the 9 to 5 job, make those changes to the variable expenses and saved up as much as I can in order to have a nice 6 month cushion.
Almost forgot one thing…to figure out the amount needed to get the business off the ground. Bartering and trade is an excellent way to get what I need without it hitting my wallet. Also, leveraging my experience and what I already know and do it myself. For instance, my 9 to 5 job was a web developer…thus designing and developing this website I did myself.