Before you quit your job to work from home, you should be financially prepared. You need to figure out how much money you need to earn from your work at home venture. To begin your calculations you have to know how much you currently spend.
Analyze Your Current Spending
I’m sure you’ve heard this before. You should chart and analyze all of your expenses for a period of a month or longer. If you’re currently using Quicken or Microsoft Money or some other financial tracking software, update your categories and get serious about charting your expenses. It’s time to let the software do what its good at doing. Let’s face it. You’re about to decide whether or not to quit your job which is a major decision. You need to have the proper data to make an informed decision.
If you don’t use software to track and summarize your expenses, use a chart. Here’s a basic budgeting chart I found on line. Modify the categories to suit your household. Not only will this give you a good indication of how much you need to make, it will tell you how much you’re spending right now. In addition to helping you to decide whether or not you’re ready to quit your job and make the work from home leap, it will help you create a realistic budget.
Personally, I like to analyze my information in an Excel spreadsheet (my brain thinks in rows and columns). I lump the expenses into three main categories:
- Needs (such as rent/mortgage, heart medicine, etc),
- Reducible expenses (loans, credit card debt, car notes) and
- Expendable expenses (which, are not necessary but nice to have such as dining out each night, movies, etc.).
Change in spending habits
To work from home you may have to temporarily pull in your belt. It’s good to know how many notches you’ve got to pull in. You might have to significantly cut down on expendable expenses or keep your job for an additional 6 months until you pay off some of the debt in the ‘Reducible expense’ column. In essence, you’ve got to get close and personal with your outstanding debt.
Experts say that you should have at least six months of living expenses socked away somewhere before you leave your job to try something new. That’ll give you breathing room and peace of mind while you’re starting your new venture. Let’s face it, there’s enough pressure in starting a new financial venture; why add the additional stress of being concerned about meeting your monthly financial obligations?
Is it worth the risk?
All that being said, not everyone accumulates a six-month living expense financial safety net before taking the leap. Some people have prematurely quit their jobs to work from home without a financial cushion only to find that within a short period of time they had to look for another day job. Don’t let that happen to you. Take the time to plan it right.
The beauty of earning money via the internet is that you can start earning money while still working your day job. It’s not an all or nothing situation. Don’t let the desire to leave cause you to quit your job prematurely.