Kat Tretina started freelance writing while working in public relations for a pharmaceutical company. “I was miserable at my job and struggled to do well. So I started writing at night and on weekends to earn extra income and gain experience in another field.”
It wasn’t long before Tretina’s income from the side letter exceeded what she made in her full-time job. “But I kept postponing quitting because of the security of a paycheck and the health insurance offered by the employer,” she said.
In 2018 she took the plunge and officially switched to full-time writing. Of course it was the right decision. During her first full year as a freelancer, her income was twice what she made as an employee. In her sophomore year, she made more than $ 200,000. “I never thought that such an income would be possible with a communication or English degree, and I know it wouldn’t be possible if I wasn’t self-employed.” In 2020, she decided to help other aspiring writers achieve the same level of success, and she co-founded the Freelance writers’ academy.
“I lost money when I went to work.”
– Dasha Kennedy, founder of The Broke Black Girl
Dasha Kennedy went from being a sideline to a full-time business owner too. After quickly working her way up in finance, she found that much of the industry lacked the empathy, understanding, and personalization to really help people. So she created one Facebook group offer better personal financial advice to women of color.
“I was teaching absolutely free every day,” said Kennedy. “That opened the door for people who wanted to work one on one with me.”
She was also given other teaching and speaking opportunities. “Eight months later, the demand to work with people … online was so high that I lost money going to work,” she said. So she quit her full time job and started building her business with financial literacy and coaching. The broken black girl.
To an outsider, these two women might make the transition from a side business to a successful full-time business seem easy. In reality there was a lot of fear, planning, and risk taking.
So, if you have dreamed of taking your dream job from sideline to the main concert, you know that it probably won’t be an easy journey. However, these tips can help make the process a lot smoother.
Find out your budget.
Employer-sponsored retirement plans and health insurance cover leave the security of a steady paycheck open and open the door to many financial strangers. Not only are you responsible for paying for expenses like taxes and insurance premiums, but your income is likely to be unpredictable – at least initially.
This is why it is important to sit down and find out what you need to make from your business in order to survive. And to make that number easier to swallow, all you can do is reduce your spending to the bare minimum.
Kennedy called it her absolute budget. “I’ve just focused on what we need to get through,” she said. In fact, Kennedy estimated that her previous monthly budget was about $ 3,500 in expenses. After she revamped it, her monthly expenses were reduced to about $ 2,000.
Tretina and her husband also focused on cutting their expenses before quitting her full-time job. “We moved to a cheaper apartment and cooked at home instead of eating out,” she said. She also paid back her student loan before making the move. “By reducing our expenses, I felt more comfortable freelancing full-time because I had more freedom in our budget. If the worst happened and my freelance income fell, we could still make ends meet. ”
Remember that a typical monthly budget or Paycheck-based budget doesn’t really work if your income fluctuates from month to month. Not only is it a good idea to cut your expenses, but also to learn how to budget on a variable income.
Build an emergency fund.
Even if you do a great job cutting unnecessary expenses off your budget, Kennedy said that the first year as an entrepreneur can be especially unpredictable. That is why it is important to have an adequate one Emergency fund. When your income is insufficient to support your budget or when there are large unexpected expenses, you shouldn’t have to rely on credit cards or other debts to get out of the hole.
Most experts recommend that you have saved enough to cover the cost of living for at least three to six months. But you might want more to hide, especially given the situation in the job market. “I was happy to have six months of expenses hidden, but you can decide that you need more or less,” said Tretina.
Plan for taxes.
Once you start working for yourself, an employer will no longer automatically deduct taxes from your wages. This is your job now. And if you work for yourself, your tax situation can change in other ways too.
“Because my income has increased significantly, I have entered a higher tax bracket,” said Tretina. “I also have to make estimated tax payments every quarter. before i just did adjusted my W-4 withholdings So I wouldn’t have to make quarterly payments. “
Since your tax situation can be vastly changing and nuanced, this is never a bad idea hire a specialist to prepare your return for you. Both Tretina and Kennedy hired accountants when they started working for themselves. “For me, that was an area I didn’t want to screw up,” said Kennedy.
Know when it is the right time to quit your job.
There are many reasons you might want to quit your job. Money is likely to be an important factor, especially if you make (or have the potential to) more from your sideline.
“My hectic business generated more income than my full-time job, and I regularly turned away prospects because I was simply unable to take on new work,” said Tretina. “For me it was a sign that it was time to work for myself full time.”
But there can also be emotional reasons why you want to leave, and it is important that the numbers match before following your heart. “Sometimes you have a very good month and it’s exciting,” said Kennedy. “When you have something that you are very passionate about and the money comes in, sometimes emotions can replace reality.”
Kennedy knew, however, that she couldn’t leave her employer until her side business consistently generated enough income to replace that paycheck, especially as a single parent. And that day came soon enough.