Want To Quit the Day Job But Can’t Afford To? Maybe You Can…
I’m sure there are a great many people who want to quit their day jobs in order to start a business making money online, or perhaps some other business but they don’t have the funds to do it.
The Standard Advice That Everybody Gives Out
Step 1 - Start Your Business On the Side
First of all, you should start working on your business on your spare time. Now this is quite feasible if it’s an online business but not so great advice if your passion is to open a restaurant.
Step 2 - Save up a Nest Egg
You cut right down on your expenditures and with the additional income that your business brings in you start to save. The idea is to save up X number of months worth of living expenses. Advice varies but it’s usually 6, 12 or 18 months worth.
Step 3 - Quit
So now you have enough money to live on for several months and your business is already earning a small income so you quit your day job so you can work at it full time. Hopefully you’ll have built up the income from the business before your nest egg wears out.
It all sounds so easy when you put it like that doesn’t it?
Why That Advice Sucks For Many People
1) It Drains Your Life Blood
Many people who want to quit their day jobs have this desire because they’ve been doing it for years and years. They are sick of it, they realise that there is more to life than office politics / stacking shelves / <insert your job here>, and they want more. I would speculate that the longer somebody has been employed, the more likely they are to reach this decision.
A lot of the time, people find themselves in this mindset at a time in their lives when they have families and they want to provide more for their families, take them to see the world, send their kids to college and so on.
If you spend all your spare time working at this business it takes you away from your family, your friends, your hobbies. It drains all of your energy which is self defeating because to be creative in business you need to be energetic, enthusiastic and full of passion. How many people feel like that after a full day at the office?
2) Your Day Job Suffers
How many of you are reading this post at work? Yes you - the one with the browser open in the background when you’re supposed to be working! In the final weeks of my job I am ashamed to admit that my mind was not on the job. Even when I was reading blogs at work, I was thinking about my business ideas.
If you are in an industry where you need to think to do your work, and your mind is on your business all day long, your work will suffer! Maybe you are somebody who can completely switch off from one thing to concentrate on another. Actually I was very good at switching off from work but that didn’t really help me fix many bugs in the last few weeks. I really hope my boss no longer reads my blog! Sorry G :)
3) This Process Can Take Years
Most businesses fail in the first year. Of those that succeed, many will only be breaking even at the end of the year and it is usually well into the second year before profits are seen. This is with a full time business! How long do you think it’s going to take when you’re only doing it part time?
Now of course there are plenty of examples to prove me completely wrong here. I am a positive thinker and I believe anything is possible. However the sad fact is that many people do not have what it takes to put their energies into fully building a business whilst still giving their all to their day jobs.
But again, I am making the assumption that many of the people in this situation are like me and have already been around the block a few times. They don’t want to spend years trying to figure this out. They are not getting any younger, they have wasted enough time. The time is NOW!
So What Did I Do?
Well as I’m sure most of you know by now, I just quit. However, that wasn’t quite as reckless as it sounds. Some of you will already know about this from a podcast that I did some time ago but I would like to spell it out here as not everybody listens to those.
I Used the Equity in My House to Fund the Business
I have what is known in the UK as an offset mortgage. Rather than have a separate checking account and a mortgage, it is all one account. I have a borrowing facility to the value agreed when I bought the house. That means that at any time I can borrow up to that amount.
When you take the mortgage out your bank balance starts out as a debit in the amount of the facility. Over time you leave money in the account to reduce the debt. Over the last few years I have amassed quite a lot of equity in the house. Furthermore, when I bought it I had a large lump sum from my previous house adding to the equity in the current one.
Because of the way this type of account works, I don’t need to go the bank to ask for a loan. I simply don’t leave money in there and over time the amount I owe increases. This is how I am funding my business.
This is exactly what I did in 2003 when I went to University full time for three years at age 32.
What Are the Implications?
As long as I don’t move house, nothing changes. My circumstances are no different, I do not ‘owe’ any body any money - I have no real debts in the traditional sense.
When I decide to sell the house what happens is that however much is still owed to the mortgage company has to be deducted from the sale price of the house. So if I move before I have cleared this debt it means that I will have less money with which to buy my next house.
When I quit my job I figured this was a safe bet because I did not intend to move for around another two years at a minimum. I am confident that within a two year period I can make enough money to not only cover my expenses but also to pay back what I borrowed. If I manage to do that, the only thing I would have lost is the interest I am missing out on by not having the money in there.
What if I don’t make that money in two years? Well, can I do it in three years? Five years? Ok so I did not make any money in my first month but by taking a long term view, if I stick at this day in, day out for years I can’t possibly fail to make a living eventually!
Something I need to add in here since I originally wrote this post - I do not solely own my house, it is my partner’s house too. It was arrogant of me to make the assumption that we would not move within 2 years. As it turns out, we ARE moving now so I have to deal with the financial implications of my decision.
There is a quote that I am fond of by Steve Pavlina. Two actually. The first is:
A general rule of thumb is that people overestimate what they can accomplish in a year, but they underestimate what they can accomplish in five years.
From the post Be Patient with Yourself.
The second one is simply: “Throw about 1000 hours of hard work at just about any problem, and you’re bound to see some serious results.” He said this in regards to his public speaking efforts.
So what’s 1000 hours? Working full time for 50 hours a week, that’s 20 weeks or just 5 months. Regardless of the implications of now having to sell my house earlier than I expected, I still fully expect to make a good living so any shortfall now will eventually be made up for.
Of course that doesn’t mean I’m going to sit on my backside all day and let time pass me by. No, I am making every effort to focus my activities towards my goals.
What Does This Mean For You?
Most people arrange their finances such that they are barely living within their means. I won’t bore you with lectures about being frugal blah blah. Instead I’ll advise you to look around at your assets.
Do you have equity in your home that you can tap into like I did? I can only speak from the standpoint of the UK but I am sure that other countries have similar kinds of mortgages and the main asset that people invest into during their adult lives is their home.
If that is not the case then do you have any other assets that you can liquidate to raise cash? Could you sell a car? If you live in certain parts of the US then may not be feasible at all, but if you live in a city like London in the UK then a car is really just a pain in the backside. Have a look around and see if you can find something that works for you.
If you are lucky enough to have been able to get through life without being sued, experiencing a medical emergency, or having assets wiped out by some unfortunate incident then I urge you to take a look at your financial situation and see if perhaps you are sitting on an opportunity that you don’t know is there.
Some people don’t realise what assets they have managed to accrue over their lifetimes.
What If You Are Young?
Throughout this post I have made the assumption that you are an adult, probably settled with a family and with a home and lifestyle that drains most of your regular income.
However if you are still young, free and single then you can be more creative. When I was 23 I moved about 70 miles away from my home town for a job that gave me a large increase on my current salary. As I had no ties at the time I just rented a really cheap (and nasty!) room within walking distance from my work place.
In the six months that I lived there I saved a lot of money and I used it to buy the house before my current one. If I had been so inclined I could have used it to start a business instead but that was at a time when I had just closed down my first four year business so I was in an employment phase.
When you’re young and have no commitments you can live cheap, you can work extra hard, you can do whatever it takes because you don’t have anybody else relying on you. Of course this doesn’t just apply to the young - you might be in your 30’s, 40′ or older and be in a position where you have no financial or family responsibilities - in which case, make the most of it while it lasts!
What If The Odds Are Stacked Against You?
- You’re young but you already have family commitments
- You were doing fine until something happened to wipe you out financially
- You’re sitting on a mountain of debt
- and so on…
Everybody has different circumstances. I was lucky in that I do have a financial asset behind me, which is the equity in my home. If I didn’t have that, I honestly don’t know whether or not I would be here now writing this post.
I don’t have any advice for those who are truly unfortunate as I am simply not qualified to give it. I can offer some hope though. If you look around will always be to find inspirational stories of people who have succeeded in life and got what they wanted against all the odds.
Conclusion
This post could be construed as reckless advice - telling people to just go quit their jobs. But that is not what I am doing. I am trying to reach out to those people who DO have hidden assets and perhaps allow them to explore the possibility that they could tap into it. People could be sitting on opportunities that they never knew existed.
Disclaimer
Note that I am not giving out financial advice here. I am not a financial professional and I don’t make any claims that any of this stuff will work for you. I’m simply outlining my own experiences in the hope that it might lead to opportunities that you have overlooked.
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Kexster
November 30, 2007
Thanks for the personal history and the quick lesson in managing your assets. I think most people here can get some important points. Place some of your money into assets that appreciate in value like houses and less of your money into cars. You do this for the long term view not for the next two years.
I must admit it is easier to take a long term view at 50 years old than it was at 25 years old. Other sources of assets might be an insurance policy your parents started for you when you were a child. You might be able to get 2,000 USD or even 10,000 USD from that source.
When I was 30 I went off on my own to start a business. I used the money that was in my pension after working for 10 years. Six months later I was looking for another job, but I have never regretted quitting and the experience.
Wishing you all the best on the move. Stay positive, we love your writings.