I want to be the boss! – Part 3
Now that you know what your living expenses are and your discretionary expenses are, it’s time to put this information to use.
Step 4: Creating a plan
You’ve got the knowledge, move forward. To build on the previous step, we’re still working on minimizing the fear. To start your business with strength I suggest you build up a cushion – save at least six months to twelve months worth of living expenses before quitting your day job. This will allow you to start your business with the comfort of knowing you’ll have enough money to pay the bills for at least six months – even if your new business brings in zero.
Tip 1: Look over your discretionary expenses and see which ones you could cut back. You don’t have to cut back on everything, just one per week or perhaps one per day.
Tip 2: Make it a game and get the whole family involved. Get creative – instead of going to the movies, perhaps play outside or go for a nature walk. Go to the library and check out books. Instead of buying that magazine, your local library might have it or it may be posted free online.
Tip 3: Keep a money journal. Write down every penny that you spend for a week. Not only does this build awareness, sometimes not spending the money is easier than writing it down.
Sub-tip: take the money you would have spent on an item and put it into your savings – even if it is only 50 cents.
Tip 4: De-clutter. Look around for those things you don’t use – get serious about it. If you think you’ll use something “some day” and that day hasn’t come for a really long time you may not need it. Gather up all you precious items that you’d be willing to part with and have a rummage sale. Another great opportunity to enlist the support of your entire family. Use the proceeds from the sale to enhance your cushion.
Sub-tip: for all those items that didn’t sell, consider donating the items. You’ll have a tax receipt you can use when you file your taxes.
Tip 5: Envelope method. Decide what you’re going to spend each week on groceries and other items. Separate the money allocated into envelopes. When you’re shopping, pay for the items out of the appropriate envelope. If you have any left over at the end of the week, put it in savings.
Next week we’ll talk about the next step to planning to become your own boss.
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