2215: [Part 2] How To Quit Your Job And Become Self-Employed - 5 Steps For Success by Michelle Schroeder-Gardner on Self-Employment Basics

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[00:01:00] This is Optimal Work Daily. How to Quit Your Job and Become Self-Employed. 5 Steps for Success. Part 2, by Michelle Schroeder-Gardner of MakingSenseofSense.com. Step 3. Save for an Emergency Fund. An emergency fund is extremely important when running your own business. This is because you may have bad months or a seasonal business, and so on, and you don't want those lower income months to cause you stress or unhappiness.

[00:01:27] An emergency fund is extremely helpful when you work for yourself. It can come in good use if you ever have that bad month or multiple bad months, or if you decide to change direction with your business, and so on. When owning a business, you never know which direction your business will go, or if you will be forced to pivot. By having an emergency fund, you will feel a little less stress so that your financial troubles are not impacting your business in a negative way. How much money should I save before quitting my job?

[00:01:55] The amount you need to have in your emergency fund before quitting your job depends on what your budget is, so it will vary from person to person. Most experts agree that having 3 to 6 months' worth of expenses saved in an emergency fund is a good idea. However, self-employed people should have more like 6 to 12 months' worth of expenses saved. That's expenses, not income. That may sound like a lot of money to set aside, but it can give you a lot of peace of mind if you have a few bad months.

[00:02:21] This is another reason why I recommended the first step about starting your business on the side of your day job. You will ideally be earning more money during this period, so it will be easier to save for self-employment. That period is also a good time to pay down debt, especially high interest rate debt. It means you'll need less saved for your emergency fund and have one less liability to worry about. Step 4. Don't forget about taxes and the legal side of running a business. No one likes to think about this side of running your own business, but it's an important area.

[00:02:51] When running your own business, you will have taxes and legal issues to think about. Many of the newly self-employed underestimate what their taxes are, and they're shocked when they realize that self-employed people should save around 30% of their income for taxes. The amount is so high because you're both the employee and employer when you're self-employed, meaning you have to pay taxes on both ends. You may also need to apply for an EIN, or Employer Identification Number, through the IRS, which is a number you use when filing and paying your taxes.

[00:03:21] When and how to pay estimated quarterly taxes is another thing you should research. Then there's also needing to legally organize your business. Many self-employed people create an LLC, Legal Liability Corporation, but you may want to look into that versus an S-Corp. Legally organizing your business separates your business and personal assets. It means if something happens to one, the other is protected from recourse. Paying your taxes and setting up an LLC aren't difficult to do,

[00:03:48] but I highly recommend that you take your time to research the best way to do it. Don't let this part of running your business prevent you from starting one. If you don't feel comfortable setting everything up on your own, you can contact an expert, such as a lawyer and or accountant. They will help you register and organize everything so your business is legit. I also recommend using someone who specializes in your field, as they will have expert advice to give you. Another thing you'll want to think about is possibly contacting a lawyer to see if there are any legal issues you should be aware of when it comes to your business.

[00:04:19] And step 5. Quit your day job. This is the step you've been waiting for. The final step when learning how to become self-employed is to one day finally leave your day job. When you finally feel prepared and ready to leave your current form of income, you should figure out the correct way to leave your job, set a final workday, and turn in your notice. Have fun and good luck with your business. How do you transition to working for yourself? If you want to know exactly how to quit your job and become self-employed,

[00:04:48] there's no exact way to do it. I've talked to successful self-employed business owners who quit their day job on a whim. Others waited years to quit. It is much easier to make the transition if you have done things like paying down your debt because it's one less thing hanging over your head. Having a decent emergency fund is also very helpful in reducing the stress of becoming self-employed. It may sound like being self-employed is scary or stressful. It can be at times. But it's mostly amazing. You are your own boss and can follow your passions.

[00:05:18] I genuinely love being self-employed, and I don't think I'd ever go back to working for someone else. There are so many reasons to quit your job and start a business, but I recommend taking your time to walk through the steps I've listed today. If you're the type of person who's scared to quit your job and start a business, the steps I've outlined will make sure you're fully prepared for self-employment. You just listened to part two of the post titled How to Quit Your Job and Become Self-Employed,

[00:05:46] Five Steps for Success by Michelle Schroeder-Gardner of MakingSenseofSense.com Observe. The North American Dad. 50s. Great polo collection. He enters his vehicle information on Carvana. An offer appears in minutes. Remarkable. He squints, reads it again, smiles, and says, Dang, that's a good offer. The highest form of approval. No haggling. No hassle. No one called him boss.

[00:06:15] He's still on the couch. Astonishing. Sell your car today on Carvana.com. Pickup fees may apply. UKG is the workforce operating platform with unified HR, payroll, and workforce management. Built to solve the unique challenges of frontline work. Powered by People First AI and decades of labor data, UKG turns workforce intelligence into real-time decisions around staffing, pay, compliance, and productivity. Enabling every worker to confidently take action as work happens.

[00:06:43] Because when work works, everything works. Learn more at UKG.com slash work. UKG. HR, pay, and workforce management. And a great finish to this post from Michelle. And another thing I didn't tell you about her yesterday, Michelle actually has three college degrees, including an MBA in finance. So you can see why we would feature her work so often on Optimal Finance Daily as well. Before she started her blog, she was working as a financial analyst, and she's actually been in the workforce since she was 14,

[00:07:12] including working full-time through high school and college. But just like she helps her readers to do, Michelle started building her blog on the side in 2011, learning the ins and outs of entrepreneurship. And the rest is history. She's now a millionaire blogger and couldn't be happier. So come by makingsenseofsense.com for a lot more content and information. And thanks again to Michelle for letting us share her work, as always. All right, that is it for today. Hope your week has been a good one. And thanks so much for listening every day, because that's how we can keep this show going.

[00:07:42] So enjoy the rest of your day, and I'll see you back here again tomorrow. And that is where your optimal life awaits.