6 Things to Consider When Making the Leap to Self-Employment

I'm about to "retire" from my almost decade long career as a financial advisor.

Why would someone do that you ask? I'm only thirty and had come to the conclusion that although the financial services industry is interesting, it's not what I'm head over heels in love with anymore.

I don't want to look back 20 years from now and have regrets that I didn't follow my dream and pursue this whole writing thing for a living. So I put a plan in place to change that!

I've been self-employed/an entrepreneur basically my whole career, but have been used to a fixed salary the last few years. I took a step back into a half advisor/half support role as we started our own family for more predictability.

My husband then became a SAHD a year and a half ago after our second child was born. I've been the breadwinner ever since. Even though I've been used to variable income in the past, we've done quite a bit of planning and talking about how this will work as I make the transition to fully self-employed again.

Here are five things to consider if you too are challenging the status quo and are thinking of making the leap from Corporate America to the life of the self-employed:

1. Have a Substantial Cash Reserve

This is one area that if you read personal finance articles, has been beaten to death. Experts advise having anywhere between 3-6 months of expenses (not income) set aside in cash reserves.

For those that are self-employed, it's better to have 6-12 months on hand. Just know cash is king and the more you have socked away, the more choice and flexibility you have. Also, it typically decreases your financial stress level, which is helpful when launching a new business!

2. Pay Down or Off Debt

Paying down debt or paying off as much as possible is a great way to prepare for self-employment. The less people you owe money to, the less income you have to worry about producing and the simpler your financial situation becomes. Simple is good when it comes to your budget!

If you're just getting started, start with trying to attack (pay-off) your lowest debt (even if the interest rate is lower than other debts). This provides a "quick win" and frees up additional dollars that can be "snowballed" into another debt payment.

Have the goal of getting as much of your consumer debt paid off as possible before you make the leap. Doing so will just increase your confidence level when it's time to make the jump!

3. Keep a Schedule

It might be tempting when you become self-employed to work too much or too little. As I gear up for making the change, I'm brainstorming a work schedule that I'll try to keep as a self-employed individual. I'm hoping this gives me the balance I'm striving for between building my business and being present and accounted for with my family.

This can work as you try to build up your new business as a side hustle too. Give yourself certain windows of time that you need to be productive in, rather than open-ended periods of time that get squandered due to social media or some other distraction. Having a finite period of time to get results is really effective when trying to stay focused!

4. Assign and Assess Goals

It's hard to know where you're going if you don't have any goals! Make sure to take some time to assess your current business and where you want it to go in the short and intermediate term.

There's no need to spend too much time on the long-term, but there's not harm in daydreaming every once in awhile either. Just make sure to declare some finite short-term goals and then keep yourself accountable by measuring your own progress or by joining a Mastermind group or something else.

5. Make a Contingency Plan

What if your business doesn't produce enough money to pay the bills? What if your savings starts to become depleted? What's your plan then?

Make sure to have a contingency plan AHEAD of time. What are some other ways that you can bring in income if you have to? If you go X months without earning enough, at what point do you go back to looking for a more traditional type of job?

Having these conversations ahead of time with yourself or your spouse will save much heart and headache down the road. Plan for the worst, while hoping for the best!

6. Build a Diversified Business

Having multiple revenue systems in one business is a great way to hedge your bets and operate in different economic climates. What other services or products can you offer to help you accomplish this?

For my freelance writing business, it means that I offer writing, editing and virtual assistance services. I also coach those newer to the business than I (which paired with my background in personal finance works well) and have a course for aspiring freelancers that teaches them to break into the game of writing for the web.

Having multiple products and services is a great way for me to diversify both my income and my time. It also keeps things fresh and interesting and allows me to carry out my creativity in different ways. I think it's fun - plus they all complement one another.

In Conclusion

Going from a predictable salary to a variable one common to the self-employed can be scary and a bit overwhelming. But you can make the idea more comfortable (for you or your significant other) by doing some of the above.

Consider starting your business as a side hustle, stuffing your cash reserves as full as possible and pay down whatever consumer debt you can. Ensure you're efficient with your time by keeping a schedule, assign yourself goals and track your progress to ensure your business is on the right track.

Make sure to have a contingency plan in case things don't work out the way you want them to and try to build a diversified business if you can. Doing any or all of the these things will just increase your odds of success and hopefully make you more confident as you prepare to make such a big change.

If this is you, good luck! I'm here cheering you on!

If you're considering self-employment, what's the one thing holding you back at the moment?

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