The Business of Starting A Business: Money

Well, it’s been a week since I made the decision to leave my job and start the journey to full-time freelance. I still feel great about it!

Of course, nothing in my life has actually changed yet, but it feels like everything has changed. Knowing there is an end in sight for the stress and unhappiness that come along with my nonprofit job makes everything easier!

Making a move of this size means I need a plan. I’m going to outline my journey to freelancing here over the next two and a half months. ‘The Business of Starting a Business’ series will be ongoing, and will chart everything I’m doing now to prepare for this change, and will follow my first few months as a freelancer.

First things first- today I’m talking about the numbers I need to become a freelancer.

Crunch the Numbers- An In-Dept Financial Plan

I’m a habitual number cruncher. I’m always dreaming of my next step, my next vacation, or how long it’ll take me to reach FIRE. This is definitely a double-edged sword. It can make me feel empowered and stressed out, all at once!

Number crunching for this job switch is a good thing, though. I personally need to have a solid financial plan-otherwise, I’ll be a mess of nerves when I actually start.

So! Here’s what I’ve come up with.

I plan to save $2,000 in my Fuck it Fund by July 1st. Like I said before, this will be enough to pay my health insurance through the end of the year. It also has enough in it to pay one month’s rent and for a full tank of gas. I plan to use this fund to offset my income in the first few months, where I anticipate making less than I do now. Knowing I won’t have to worry about paying my health insurance, as well as knowing I have a months rent at the ready, will be a huge relief.

I will also have my E-Fund of $5,600 by July 1st. Though the hope is not to have to touch it at all, I’m so glad it’s there. Emergency funds just give you such peace of mind, no matter what your situation is!

Because I’m such a financial worry wart, I am going to keep catering before and during my freelancing, to the tune of $600 a month. Knowing that I will have money coming in no matter what is such a stress reliever. While yes, I dislike catering, I imagine it’ll be much easier when I’m not doing it in conjunction with my nonprofit job. I plan to cater between 4-6 times a month through the remainder of the year. This amount ensures I’ll make enough each month to cover my rent and utilities.

Create and go Into ‘Freelancer Budget Mode’

I’ve spoken before about how I’m mostly living on frugal autopilot these days. I still am, and it’s still awesome!

I’ve definitely eased up since my days of debt payoff. I also moved earlier this month, and had two friends come visit last month, resulting in a whole bunch of spending (more deets on the move next week!) I haven’t become a mindless spender, but I did need to re-evaluate my budget and spending habits.

I don’t want to go back to being quite as hardcore as I was last year, but I do want to tighten the belt a little. I’m implementing a few new rules for my budget.

Drive less: I’ve gotten back into the habit of driving more. I have a bike, I have two good legs- I shouldn’t be doing this! I’m ramping up my carpooling, walking and biking game as of now.

No eating out- I did a lot of that in March with friends, and then treated my boyfriend’s parents to dinner last week for helping us move. All good meals with good people, but it is SO EXPENSIVE. Time to cut that shit out entirely.

The move has also reduced my rent, and hopefully utilities. I estimate saving around $30 each month. I can still walk to a grocery store, a gas station, and an ice cream place, so my quality of life remains high!

Luckily the costs of becoming a freelancer are very low, so I don’t have to front a lot of money. Still, I will have to make some business related purchases, so I want to get my personal budget on track to give me the flex room to do it.

Letting go of My FIRE Dream- At Least For the Moment

This is a little hard to write, and a little misleading. I’m still aiming to reach FIRE by 43. That’s 15 years away, after all! Lots can happen between now and then. Saving is still a huge priority of mine, and that’s not going to change.

What is going to change is the pressure I’ve been putting on myself. I read a lot of FIRE blogs and see people doing incredible things with their financial freedom. It’s something I want desperately for myself. 

It’s also something that will strangle me on this new journey if I don’t change the plan. As a low-income earner, I’ve been pinching pennies and driving myself crazy trying to up my savings. With my focus now switching to building myself a business, I need to be comfortable spending some money on that, and not worrying that I didn’t put it in my retirement accounts.

I’m maxing out my 2016 IRA shortly, and I plan to devote another $1,500 to retirement this year. And that’s it. For people on the road to FIRE, that’s not nearly enough. Hell, it might not even be 15% of my income, which is the bare minimum recommended!

But it’s the most I’ve ever save towards retirement, and it’s probably the most I can do this year. I have to be ok with that for the time being.

That’s my prep so far for this life change. What do y’all think? Smart, dumb, forgetting about something huge? Let me know!

Kara

Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.