Help me fly by the seat of my financial pants.
July 7, 2012 9:54 AM Subscribe
Too many golden handcuffs. How do I get comfortable ridding myself of them?
Privilege, and the fear of the unknown that comes with getting rid of it, is preventing me from living a fulfilling life.
I grew up in an upper middle class family where we weren't wealthy, but were never strapped for necessities. Because my parents placed such an emphasis on studying/getting into college, I never worked at a "real" job (that is, a job purely for income, rather than an internship) through high school or college. I then graduated from college and took an extremely well-paid finance job, which I am now, 5 years later, starting to feel constrained by.
I would like to leave this job next year and start a business of my own. I'll have a high five digit number to a low six digit number in savings, which would get me about two years' worth of living expenses (not including investment costs, which would bring that down to about a year by my conservative estimate). I think there's a clear need for this business, the startup costs are reasonable, and if it were not to work out, I'd probably take an internship at another startup and then apply to business school.
Problem is, the relative abundance and privilege in my life thus far has made me extremely paranoid about running out of money (and by running out of money, I mean not having 6 months' of living expenses in a bank account). I know I have to take some risks in order to live a fulfilling life, but I can't get past this fear that I don't know how to budget effectively, I'll run out of cash way sooner than I expected, and end up destitute on the street. Compounding this problem is that I'm about to move in with my boyfriend (for both financial reasons and quality of life/warm and fuzzy reasons), which my parents HIGHLY don't approve of, so I don't think I should be counting on falling back on them if things don't go the way I planned. (Note: I've been completely financially independent since leaving college.) Since I've also been at one job since I graduated, I'm also worried about how job hunting will go if I need to go back to working a regular corporate job.
So, how do people get comfortable operating without a financial cushion? If you've worked on a startup, or just been in a similar situation where you get to do something fulfilling that's not financially comfortable, how have you practically dealt with the risk? If you had to go back into the workforce or otherwise get back on your feet afterward, how was it?
Lack of snark would be appreciated - I realize I'm lucky in many ways to have to even ask this question, but I'm just trying to be responsible.
Privilege, and the fear of the unknown that comes with getting rid of it, is preventing me from living a fulfilling life.
I grew up in an upper middle class family where we weren't wealthy, but were never strapped for necessities. Because my parents placed such an emphasis on studying/getting into college, I never worked at a "real" job (that is, a job purely for income, rather than an internship) through high school or college. I then graduated from college and took an extremely well-paid finance job, which I am now, 5 years later, starting to feel constrained by.
I would like to leave this job next year and start a business of my own. I'll have a high five digit number to a low six digit number in savings, which would get me about two years' worth of living expenses (not including investment costs, which would bring that down to about a year by my conservative estimate). I think there's a clear need for this business, the startup costs are reasonable, and if it were not to work out, I'd probably take an internship at another startup and then apply to business school.
Problem is, the relative abundance and privilege in my life thus far has made me extremely paranoid about running out of money (and by running out of money, I mean not having 6 months' of living expenses in a bank account). I know I have to take some risks in order to live a fulfilling life, but I can't get past this fear that I don't know how to budget effectively, I'll run out of cash way sooner than I expected, and end up destitute on the street. Compounding this problem is that I'm about to move in with my boyfriend (for both financial reasons and quality of life/warm and fuzzy reasons), which my parents HIGHLY don't approve of, so I don't think I should be counting on falling back on them if things don't go the way I planned. (Note: I've been completely financially independent since leaving college.) Since I've also been at one job since I graduated, I'm also worried about how job hunting will go if I need to go back to working a regular corporate job.
So, how do people get comfortable operating without a financial cushion? If you've worked on a startup, or just been in a similar situation where you get to do something fulfilling that's not financially comfortable, how have you practically dealt with the risk? If you had to go back into the workforce or otherwise get back on your feet afterward, how was it?
Lack of snark would be appreciated - I realize I'm lucky in many ways to have to even ask this question, but I'm just trying to be responsible.
6 months' salary is a good rule of thumb for a safety cushion. Looks like you won't have a down payment or other huge expenses to contend with, so you should be OK. Bigger picture, though, is your relationship with your BF for the long haul? It should be a mutual expectation that you both be the other's safety cushion during times of uncertain income. Good luck.
posted by moammargaret at 10:04 AM on July 7, 2012 [1 favorite]
posted by moammargaret at 10:04 AM on July 7, 2012 [1 favorite]
I know your fear, I mitigated it by keeping my foot in the workforce part-time to prevent a gap in my resume and to continue benefits/senoirity (I'm in a unionised environment and those safety nets are important to me). With a start-up you may not have the luxury of time however.
You are giving yourself enough lead time to adjust your budget, can you and your boyfriend agree to scale down your lifestyles and contribute equally to joint and seperate savings. Since your parents are no longer a safety net is your boyfriend will to take on that role?
posted by saucysault at 10:05 AM on July 7, 2012
You are giving yourself enough lead time to adjust your budget, can you and your boyfriend agree to scale down your lifestyles and contribute equally to joint and seperate savings. Since your parents are no longer a safety net is your boyfriend will to take on that role?
posted by saucysault at 10:05 AM on July 7, 2012
Sign up for Mint so you can see what you've been spending so that you have a clear picture of what a six-month safety net actually looks like. Write down all the monthly bills you know you will have to pay - auto insurance, phone bill, etc. Add in rent for your own apartment in case it doesn't work out with your boyfriend. Don't forget food, gas, and other "flexible" expenses. Multiply by six and put that out of reach. High five-figures/low six-figures should easily be much more than this - if it's not, you really need to see a financial planner.
My understanding of forming a business is that you incorporate so that your personal finances are kept separate from the business'. So if the shit hits the fan, you still have your personal savings account that is untouchable by the business' creditors. I AM NOT A LAWYER or an accountant and you absolutely should consult with one or both.
posted by desjardins at 10:08 AM on July 7, 2012
My understanding of forming a business is that you incorporate so that your personal finances are kept separate from the business'. So if the shit hits the fan, you still have your personal savings account that is untouchable by the business' creditors. I AM NOT A LAWYER or an accountant and you absolutely should consult with one or both.
posted by desjardins at 10:08 AM on July 7, 2012
Response by poster: Oops, forgot to mention - my therapist is already helping with this (but is SO EXPENSIVE which sort of adds to the worry. ugh.)
My boyfriend makes a fair bit less than I do and I don't know that he'd be able to cover for both of us. We're in NYC and the cost of living is ridiculous. I'd say we're in it for the foreseeable future.
Won't threadsit but I'm here to answer questions if anyone needs more info.
posted by dynamiiiite at 10:09 AM on July 7, 2012
My boyfriend makes a fair bit less than I do and I don't know that he'd be able to cover for both of us. We're in NYC and the cost of living is ridiculous. I'd say we're in it for the foreseeable future.
Won't threadsit but I'm here to answer questions if anyone needs more info.
posted by dynamiiiite at 10:09 AM on July 7, 2012
Best answer: Plan, plan, plan. It sounds like you already have most or all of a plan, but remember that the plan has two purposes:
1. Help you do the thing.
2. Help you not freak out over the thing.
The trick is that any "what if" your mind comes up with, that could send you into a freakout tailspin, you should have a clear ready answer. X months w/out traction, you start looking for a job. Less than $Y in the bank, start doing serious budget trimming, which involves Z. That sort of thing. Every (realistic) outcome has a resolution. Train your mind to go there, rather than "destitute in the streets" each time. Keep in mind that you *have* a financial cushion, just not an infinite one. THat's good!
As for your other points:
- I believe folks who have resources are almost obligated to take (constructive) risks -- we're the ones who can most afford to, and that's how interesting stuff gets done.
- As for returning to work, anywhere worthwhile will see your attempt to start a business, even if it doesn't succeed, as an asset rather than a liability. The main problem with many job applicants as they present themselves is sameness -- you will, at worst, have a very interesting story to tell.
posted by feckless at 10:14 AM on July 7, 2012 [6 favorites]
1. Help you do the thing.
2. Help you not freak out over the thing.
The trick is that any "what if" your mind comes up with, that could send you into a freakout tailspin, you should have a clear ready answer. X months w/out traction, you start looking for a job. Less than $Y in the bank, start doing serious budget trimming, which involves Z. That sort of thing. Every (realistic) outcome has a resolution. Train your mind to go there, rather than "destitute in the streets" each time. Keep in mind that you *have* a financial cushion, just not an infinite one. THat's good!
As for your other points:
- I believe folks who have resources are almost obligated to take (constructive) risks -- we're the ones who can most afford to, and that's how interesting stuff gets done.
- As for returning to work, anywhere worthwhile will see your attempt to start a business, even if it doesn't succeed, as an asset rather than a liability. The main problem with many job applicants as they present themselves is sameness -- you will, at worst, have a very interesting story to tell.
posted by feckless at 10:14 AM on July 7, 2012 [6 favorites]
It sounds like you have the rules of thumb covered, but now is when you need a bit more. You should have a budget, an outline of how you would like the business to go, and ways to check on a regular basis whether you are on track.
Flying by the seat of the pants isn't encouraged, but you can take off into clouds if you have good charts and instruments and know where you want to get to.
The key is that with budget, priorities and goals in place you have a disciplined and regular review. If things start to go off track, don't panic, just adjust the plan, adjust the targets, verify you will be okay and move on. Like anything else in life this takes practice. You should be able to tell way before you hit six months of savings left how things are going. If it is bad enough that you'll need to shutter your business that still gives you half a year to go looking for work.
You won't overcome your anxiety by thinking about it. But, you can start to do things despite it, and you'll soon find that it fades (and as a start-up business you'll no doubt have plenty of other things to worry about!)
posted by meinvt at 10:26 AM on July 7, 2012 [2 favorites]
Flying by the seat of the pants isn't encouraged, but you can take off into clouds if you have good charts and instruments and know where you want to get to.
The key is that with budget, priorities and goals in place you have a disciplined and regular review. If things start to go off track, don't panic, just adjust the plan, adjust the targets, verify you will be okay and move on. Like anything else in life this takes practice. You should be able to tell way before you hit six months of savings left how things are going. If it is bad enough that you'll need to shutter your business that still gives you half a year to go looking for work.
You won't overcome your anxiety by thinking about it. But, you can start to do things despite it, and you'll soon find that it fades (and as a start-up business you'll no doubt have plenty of other things to worry about!)
posted by meinvt at 10:26 AM on July 7, 2012 [2 favorites]
It sounds like you're already saving, no? People who don't know how to budget rarely wind up with 5-figure savings accounts. Start now living as far below your means as you can manage so it doesn't come as much of a shock later. Moving in with your boyfriend might help you reduce expenses. If you know that you have enough money and you're still freaking out, that's something only your therapist can help you with.
posted by bleep at 10:26 AM on July 7, 2012
posted by bleep at 10:26 AM on July 7, 2012
Since therapy has already come up twice in this discussion, I'll start there. You don't need therapy, at least not for this. Fear or anxiety about jumping off a dock is normal, and helps focus the mind - about risk assessment, about expenses, and about working hard at your business to keep it from failing.
You sound like a self-aware, honest person, so I don't say this to try to shame you about having advantages, merely to point out that lots of people cope without those advantages. If you walk down a busy street and see 100 people go by, probably fewer than 10 could live without income for a year. And yet, somehow, life goes on. I think rather than analyzing it (or paying someone to analyze you about it), you just accept it.
Work on the business idea as long as you can before quitting the job, give notice, leave on good terms, and then start working like hell to start turning a profit. While you're burning cash, get your lifestyle down to the bare metal.
If the worst happens, you've still got a degree, and at that point you'll have had the experience of trying a start-up. Believe it or not, people who have tried and failed at a business are often more marketable than those who never have. If you get to a point where your cash is low and your business prospects are lower, you'll still have time to find another job.
I would also question why the idea of going back to school. You've got a degree in a marketable field; why not (if you need to down the road), look for another job using that degree? It doesn't even need to be in exactly the same field.
posted by randomkeystrike at 10:32 AM on July 7, 2012 [1 favorite]
You sound like a self-aware, honest person, so I don't say this to try to shame you about having advantages, merely to point out that lots of people cope without those advantages. If you walk down a busy street and see 100 people go by, probably fewer than 10 could live without income for a year. And yet, somehow, life goes on. I think rather than analyzing it (or paying someone to analyze you about it), you just accept it.
Work on the business idea as long as you can before quitting the job, give notice, leave on good terms, and then start working like hell to start turning a profit. While you're burning cash, get your lifestyle down to the bare metal.
If the worst happens, you've still got a degree, and at that point you'll have had the experience of trying a start-up. Believe it or not, people who have tried and failed at a business are often more marketable than those who never have. If you get to a point where your cash is low and your business prospects are lower, you'll still have time to find another job.
I would also question why the idea of going back to school. You've got a degree in a marketable field; why not (if you need to down the road), look for another job using that degree? It doesn't even need to be in exactly the same field.
posted by randomkeystrike at 10:32 AM on July 7, 2012 [1 favorite]
I know I have to take some risks in order to live a fulfilling life, but I can't get past this fear that I don't know how to budget effectively, I'll run out of cash way sooner than I expected, and end up destitute on the street.
You don't "get past" the fear first. You have to do the things you're afraid of doing before you stop being afraid of them.
Just bite the bullet and go, you don't have the budget for therapy anyway.
posted by mhoye at 10:37 AM on July 7, 2012 [9 favorites]
You don't "get past" the fear first. You have to do the things you're afraid of doing before you stop being afraid of them.
Just bite the bullet and go, you don't have the budget for therapy anyway.
posted by mhoye at 10:37 AM on July 7, 2012 [9 favorites]
Best answer: I quit my six figure job and sold my house at a loss to move back home to Canada. I had a husband with a lower paying job and a five figure savings account. I figured I would take up consulting and had some prospects lined up, but nothing confirmed before I quit.
Here's what it's like to quit. Sometimes, I go to a swimming pool with a 5m diving board. I go to the swimming pool, climb the 5m diving board, and stand at the end of the board. If I gingerly place my toes at the end of the board and look down, I start feeling queasy and dizzy and question climbing up to the board in the first place (sit at a pool and watch one day, this happens to a lot of girls on the board). The only way to go off the board is to take a deep breath, look straight ahead, and jump. I know I can swim, once I've jumped I can swim get to the side of the pool no trouble, the only problem is taking the leap.
Quitting my job felt like standing at the end of the 5m board. The more I thought about the uncertainty ahead, the queasier I got, the more doubts I had that I made the right decision. However, once I got up a head of steam and jumped, I kept moving forward. Sure I blew some savings. My change in my quality of life is 100% worth it.
As it turns out, I did some work consulting but it was not for me, so I went back to full time work. If your business is consulting, you will be networking constantly anyway as part of the business, so finding full time work could be quite natural. Just work one of your contacts and get a job from there - it will be fine.
So take a deep breath and jump. It sounds like you can swim. Don't look down.
posted by crazycanuck at 10:44 AM on July 7, 2012 [10 favorites]
Here's what it's like to quit. Sometimes, I go to a swimming pool with a 5m diving board. I go to the swimming pool, climb the 5m diving board, and stand at the end of the board. If I gingerly place my toes at the end of the board and look down, I start feeling queasy and dizzy and question climbing up to the board in the first place (sit at a pool and watch one day, this happens to a lot of girls on the board). The only way to go off the board is to take a deep breath, look straight ahead, and jump. I know I can swim, once I've jumped I can swim get to the side of the pool no trouble, the only problem is taking the leap.
Quitting my job felt like standing at the end of the 5m board. The more I thought about the uncertainty ahead, the queasier I got, the more doubts I had that I made the right decision. However, once I got up a head of steam and jumped, I kept moving forward. Sure I blew some savings. My change in my quality of life is 100% worth it.
As it turns out, I did some work consulting but it was not for me, so I went back to full time work. If your business is consulting, you will be networking constantly anyway as part of the business, so finding full time work could be quite natural. Just work one of your contacts and get a job from there - it will be fine.
So take a deep breath and jump. It sounds like you can swim. Don't look down.
posted by crazycanuck at 10:44 AM on July 7, 2012 [10 favorites]
It'll be okay!! You'll scale your spending accordingly and it will work out all right.
When your business fails and you run out of cash, you'll wow future interviewers or wow the business school admissions committee with tales of what you learned from your entrepreneurial mistakes.
If your business succeeds, you'll be set until you decide to move on to the next big thing.
If your business REALLY succeeds you buy a yacht and throw the sorts of parties where your drunken guests accidentally drop the baby grand piano into the harbor.
In any of the above scenarios, you are a-okay.
Maybe helpful to think in terms of setting an asset floor for yourself: I have 100k banked. 40k goes into the business, 50k for living expenses. When I drop to 10k in liquid assets, I'll start applying for jobs/bschool as a backup.
Also, you'll be fine.
posted by slateyness at 11:05 AM on July 7, 2012
When your business fails and you run out of cash, you'll wow future interviewers or wow the business school admissions committee with tales of what you learned from your entrepreneurial mistakes.
If your business succeeds, you'll be set until you decide to move on to the next big thing.
If your business REALLY succeeds you buy a yacht and throw the sorts of parties where your drunken guests accidentally drop the baby grand piano into the harbor.
In any of the above scenarios, you are a-okay.
Maybe helpful to think in terms of setting an asset floor for yourself: I have 100k banked. 40k goes into the business, 50k for living expenses. When I drop to 10k in liquid assets, I'll start applying for jobs/bschool as a backup.
Also, you'll be fine.
posted by slateyness at 11:05 AM on July 7, 2012
If you do end up broke, one thing it will teach you is that you can survive being broke.
posted by nebulawindphone at 11:14 AM on July 7, 2012 [2 favorites]
posted by nebulawindphone at 11:14 AM on July 7, 2012 [2 favorites]
One thing I like to do is to plan out the worse-case scenario.
In other words: "Okay, so everything falls apart. I have six months of living expenses and no income. If I haven't found a job by month 5, me and Boyfriend break the lease and couch-surf with that couple who has a spare room in the suburbs, or rent a cheap place in Y for a while that we can afford on his income, and toss most of our stuff into storage for the time being."
In my case, I know damn well that, if I had to, I could toss nearly my whole life into my parents' basement, rent a really cheap room in a big shared house in a neighborhood I don't love but could be ok with, and can therefore get by on a much, much reduced income. Alternately, some friends of mine have a room that they use for an office/hangout room; they might be open to hosting me there for a couple of months because they could probably do with the extra money and help around the house. Do I want that? No, definitely not. But I know I can do it, and knowing that the worst case scenario really isn't that bad helps me dive into things without stressing so much about What If It All Goes Wrong.
posted by Tomorrowful at 11:15 AM on July 7, 2012
In other words: "Okay, so everything falls apart. I have six months of living expenses and no income. If I haven't found a job by month 5, me and Boyfriend break the lease and couch-surf with that couple who has a spare room in the suburbs, or rent a cheap place in Y for a while that we can afford on his income, and toss most of our stuff into storage for the time being."
In my case, I know damn well that, if I had to, I could toss nearly my whole life into my parents' basement, rent a really cheap room in a big shared house in a neighborhood I don't love but could be ok with, and can therefore get by on a much, much reduced income. Alternately, some friends of mine have a room that they use for an office/hangout room; they might be open to hosting me there for a couple of months because they could probably do with the extra money and help around the house. Do I want that? No, definitely not. But I know I can do it, and knowing that the worst case scenario really isn't that bad helps me dive into things without stressing so much about What If It All Goes Wrong.
posted by Tomorrowful at 11:15 AM on July 7, 2012
Budget and leave yourself a window of money in case this plan does not work out. For example, have a 1 year cushion during which you will be trying to get the business profitable. Then, if you go past that window, commit to yourself that you are scrapping the idea and will reenter the job market (and leave yourself a six month cushion to find a new job if that turns out to be the case).
posted by wolfdreams01 at 11:21 AM on July 7, 2012 [1 favorite]
posted by wolfdreams01 at 11:21 AM on July 7, 2012 [1 favorite]
You see a need for the business and have an idea, but do you have a plan? What is your business plan? What are your startup costs? How are you getting health insurance? How much do you need to invest? How much profit do you need to make and by when? What are your goals and milestones and what defines success? What do you do if you're not meeting them or fall behind schedule? How do you get input from someone who has experience in startups and can help you make sure your business plan is reasonable and responsible before you invest your money and throw yourself into it? What happens if something goes wrong or it doesn't work out - at what point will you cut your losses and walk away, and move on to Plan B?
That would be my advice - if you have anxiety about stepping into the unknown because it's uncomfortable, plan ahead as much as you can with the help of an expert and set out all your milestones so you know where you stand and what constitutes progress, and you aren't just working frantically to make money ASAP without really knowing if you're on track. If you are going to use your own savings and leave your job and do this yourself, this would be the way to go. I might advise against doing this, though, if you are the type who gets totally paralyzed by anxiety when managing projects? I do - when I look at a big project plan, it just overwhelms me and I can't make any progress, but if the clarity of goals and milestones helps you, by all means make a plan and start your business.
If you have skills and experience I don't think you would have a lot of trouble going back to a corporate job in a year or two if you need to, assuming you live somewhere that has a decent job market.
posted by citron at 11:35 AM on July 7, 2012
That would be my advice - if you have anxiety about stepping into the unknown because it's uncomfortable, plan ahead as much as you can with the help of an expert and set out all your milestones so you know where you stand and what constitutes progress, and you aren't just working frantically to make money ASAP without really knowing if you're on track. If you are going to use your own savings and leave your job and do this yourself, this would be the way to go. I might advise against doing this, though, if you are the type who gets totally paralyzed by anxiety when managing projects? I do - when I look at a big project plan, it just overwhelms me and I can't make any progress, but if the clarity of goals and milestones helps you, by all means make a plan and start your business.
If you have skills and experience I don't think you would have a lot of trouble going back to a corporate job in a year or two if you need to, assuming you live somewhere that has a decent job market.
posted by citron at 11:35 AM on July 7, 2012
Without any snark intended - You should feel apprehensive about giving up a stable income in an attempt to start your own business - 90% of startups fail, and you need to plan for that as a likelyhood, not a possibility.
That said, it sounds like you've taken excellent steps to set yourself up a safety net. You have significant personal assets, you have decided to move in with your partner (which not only reduces living expenses, but in the absolute worst case, will buy you a few more "oh shit what do I do" months before you find yourself homeless). On top of that, unless you've done something exceptionally bad that you didn't mention, your parents won't just let you starve to death; they may not pay your mortgage for you, but they'll keep you alive in a pinch.
So how to take the big step? My first thought - Can you break it down into somewhat smaller steps? Can you do it "on the side", putting 10-20 hours or so a week (while still holding down the 9-to-5) into getting your prerequisites together and paid for, and most importantly, building up a customer base? Can you possibly keep working your normal job part-time ((or find a related one where you can) for as long as your own business doesn't require 100% of your time? And when you finally do have your make-or-break moment, do your best not to burn any bridges as you make that transition - Your old coworkers may end up sending more work your way than any amount of advertising will ever get you (and of course, in the worst case, you don't want to have to ask the guy you gleefully told where to stick his TPS report cover sheet format, for a job five years from now).
Basically, just keep in mind that stepping out of your comfort zone doesn't mean sticking your hand in a blender. Don't let the "golden handcuffs" keep you from doing what you want to out of fear of failure, but also don't think you need to trade them in for a leaden noose on the way to achieving your goals.
posted by pla at 12:07 PM on July 7, 2012 [1 favorite]
That said, it sounds like you've taken excellent steps to set yourself up a safety net. You have significant personal assets, you have decided to move in with your partner (which not only reduces living expenses, but in the absolute worst case, will buy you a few more "oh shit what do I do" months before you find yourself homeless). On top of that, unless you've done something exceptionally bad that you didn't mention, your parents won't just let you starve to death; they may not pay your mortgage for you, but they'll keep you alive in a pinch.
So how to take the big step? My first thought - Can you break it down into somewhat smaller steps? Can you do it "on the side", putting 10-20 hours or so a week (while still holding down the 9-to-5) into getting your prerequisites together and paid for, and most importantly, building up a customer base? Can you possibly keep working your normal job part-time ((or find a related one where you can) for as long as your own business doesn't require 100% of your time? And when you finally do have your make-or-break moment, do your best not to burn any bridges as you make that transition - Your old coworkers may end up sending more work your way than any amount of advertising will ever get you (and of course, in the worst case, you don't want to have to ask the guy you gleefully told where to stick his TPS report cover sheet format, for a job five years from now).
Basically, just keep in mind that stepping out of your comfort zone doesn't mean sticking your hand in a blender. Don't let the "golden handcuffs" keep you from doing what you want to out of fear of failure, but also don't think you need to trade them in for a leaden noose on the way to achieving your goals.
posted by pla at 12:07 PM on July 7, 2012 [1 favorite]
Do you really love this business plan? Can you see yourself fighting for a five minutes of someone's time to talk to them about it, a la Chris Farley in Tommy Boy? Would you be proud to be introduced at a party as "dynamiiiite, my handcuff-selling [insert your business here] friend"? If this is just an idea that seems feasible/profitable but not your passion, you may succeed but in 5 years wind up right back in this place, bored and wondering what to do next. And if it's not your passion, maybe you should keep looking until you find the one that is.
posted by lily_bart at 12:55 PM on July 7, 2012
posted by lily_bart at 12:55 PM on July 7, 2012
I would like to leave this job next year and start a business of my own. I'll have a high five digit number to a low six digit number in savings, which would get me about two years' worth of living expenses (not including investment costs, which would bring that down to about a year by my conservative estimate). I think there's a clear need for this business, the startup costs are reasonable, and if it were not to work out, I'd probably take an internship at another startup and then apply to business school.
I'm going to echo the other people who say that the way most people do this is to start working the business while employed full-time by somebody else, and not quitting until the business is generating, not necessarily a profit, but at least stable, steady cash flow. It means burning the candle at both ends, but you're young and rich, so this is the best time to do it.
Don't quit without a plan for when you will pull the plug on the business if it fails.
posted by Snarl Furillo at 1:32 PM on July 7, 2012
I'm going to echo the other people who say that the way most people do this is to start working the business while employed full-time by somebody else, and not quitting until the business is generating, not necessarily a profit, but at least stable, steady cash flow. It means burning the candle at both ends, but you're young and rich, so this is the best time to do it.
Don't quit without a plan for when you will pull the plug on the business if it fails.
posted by Snarl Furillo at 1:32 PM on July 7, 2012
Problem is, the relative abundance and privilege in my life thus far has made me extremely paranoid about running out of money (and by running out of money, I mean not having 6 months' of living expenses in a bank account). I know I have to take some risks in order to live a fulfilling life, but I can't get past this fear that I don't know how to budget effectively, I'll run out of cash way sooner than I expected, and end up destitute on the street.
Easy: minimize your risks. Either start the business while still employed or start your business using outside investors who are willing to pay you a salary comparable to what you're making now, except that you will have a significant equity stake, giving you access to a significant upside.
Embrace your lack of interest in risk-taking and instead insulate yourself from any downsides when starting your business.
I think we over-romanticize the entrepreneur who "risks everything" to be successful. That's really not necessary. Even in the worst case scenario, you return to your old industry.
posted by deanc at 1:53 PM on July 7, 2012 [3 favorites]
Easy: minimize your risks. Either start the business while still employed or start your business using outside investors who are willing to pay you a salary comparable to what you're making now, except that you will have a significant equity stake, giving you access to a significant upside.
Embrace your lack of interest in risk-taking and instead insulate yourself from any downsides when starting your business.
I think we over-romanticize the entrepreneur who "risks everything" to be successful. That's really not necessary. Even in the worst case scenario, you return to your old industry.
posted by deanc at 1:53 PM on July 7, 2012 [3 favorites]
Felix Dennis, serial entrepreneur, summed it up nicely:
"A salary is crack." - or words to that effect.
How you respond to that line tells you a lot about what kind of person you are.
On a practical level - how hard would it be to get back into a For The Man job if this didn't work out? How much would you hate yourself years later if you failed to follow the dream?
I've known Go For It types who, like the majority failed - but would never have not tried for the world.
posted by IndigoJones at 2:51 PM on July 7, 2012
"A salary is crack." - or words to that effect.
How you respond to that line tells you a lot about what kind of person you are.
On a practical level - how hard would it be to get back into a For The Man job if this didn't work out? How much would you hate yourself years later if you failed to follow the dream?
I've known Go For It types who, like the majority failed - but would never have not tried for the world.
posted by IndigoJones at 2:51 PM on July 7, 2012
I always find www.globalrichlist.com helps put things in perspective. Type in your annual income to see how rich you really are. But then also try typing in some lower figures, and you'll quickly see that $30,000 a year is not a horrible fate. It seems like you've already got a fair bit of perspective though, which is great.
In regards to budgeting, I agree that something like mint.com helps. I decided to reduce my spending for different reasons (just wanted to consume less stuff), and tracked all my spending with a simple phone app. As well as giving a clear picture of my spending habits, it actually reduced my spending too, simple because I was suddenly forced to think about each purchase.
Finally, a simple and very effective rule-of-thumb for spending less: Zero impulse purchases. None. When you go shopping (in real life or online), have a list and stick to it. If something catches your eye that's not on your list, too bad.
posted by pablocake at 9:44 PM on July 7, 2012
In regards to budgeting, I agree that something like mint.com helps. I decided to reduce my spending for different reasons (just wanted to consume less stuff), and tracked all my spending with a simple phone app. As well as giving a clear picture of my spending habits, it actually reduced my spending too, simple because I was suddenly forced to think about each purchase.
Finally, a simple and very effective rule-of-thumb for spending less: Zero impulse purchases. None. When you go shopping (in real life or online), have a list and stick to it. If something catches your eye that's not on your list, too bad.
posted by pablocake at 9:44 PM on July 7, 2012
Best answer: So, how do people get comfortable operating without a financial cushion?
"Comfortable" is a stretch. Vulnerability to risk never gets comfortable when the essentials are at stake. It's absolutely no fun being in pain wondering if this is the time you should go to the doctor even though you can't afford it.
That said: get rent and healthcare covered and you can likely live fairly comfortably on less than an additional $500 a month. Probably $200, or even less.
I've had a number good times in my life where I've spent that little and even less: I tended to buy foodstuffs on the affordable side (rice, lentils, eggs, potatoes), I accepted donations/charity from others, I walked/biked more and drove rarely, and walking/hiking became recreation, along with the local library, making things using the tools I had at hand, and bargain hunting at thrift stores.
It's actually a pretty nice way to live in some ways (assuming you don't have to worry about where the next $x00 you need per month is coming from), because you find yourself less dependent on some outside purveyor of goods/services and find more satisfaction in determining how you spend your time and utilizing your native ingenuity.
There are limitations. Sometimes something expensive breaks and you're not sure how to replace/repair it. Sometimes you want to go spend time with friends an hour away, but you can't afford the bus fare. Or gas/insurance to keep a car running. But you can live this way for a while, particularly if there's a reason you're doing it that you really care about.
There's a hazard here, though, for people who are trying to get some enterprise off the ground: the more time is a valuable commodity for the enterprise, the better it is to burn cash to save it. It can be time consuming to learn to live very minimally, and it's arguably inherently somewhat time consuming once you do it -- walking/biking/busing often just takes more time, figuring out how to do/get something takes more time than paying someone who's already taken care of it. I think that's one reason a lot of people don't do it until they have to.
If you've got the motivation, though, you could begin seeing what you can really live without now, while you've got a job. Limit yourself to $500 for a month outside of rent/healthcare (maybe transportation to/from work on top of that) and see how it goes. Then try to cut it down. And start spending the time freed up by what you would have spent on entertainment/shopping to think, plan, and act about starting your business.
This is all about a partial risk minimization strategy focused on preserving resources by expending little except on true essentials, of course. There are a few other things to consider:
* your plan B if your startup doesn't work out. One thing you might want to do right now is perform a job search -- find out how easy/hard it would be for you to scare up leads and even get some offers if you were to have to do it. Knowing that can help you know how much time you might want to allow yourself to find another conventional job (1 month? 3 months? 6 months?) if you see your resources getting depleted and don't see entrepreneurial success in the near-enough future.
* the fact that risk minimization has diminishing returns. You can mitigate risk with insurance and savings accounts and networks of people willing to help you and exercise and clean and thrifty living. You can't stop the car you won't see, the natural disaster that stops the society you live in in its tracks, the hereditary ailment that robs you of health, and eventually, the changes that time will bring to everything you have now. This is at least part of what Steve Jobs meant when he said "You are already naked." Significant long-term risks of losing everything already apply. It might do you some good to face them now while you have resources and time to recover.
posted by weston at 3:37 PM on July 8, 2012 [1 favorite]
"Comfortable" is a stretch. Vulnerability to risk never gets comfortable when the essentials are at stake. It's absolutely no fun being in pain wondering if this is the time you should go to the doctor even though you can't afford it.
That said: get rent and healthcare covered and you can likely live fairly comfortably on less than an additional $500 a month. Probably $200, or even less.
I've had a number good times in my life where I've spent that little and even less: I tended to buy foodstuffs on the affordable side (rice, lentils, eggs, potatoes), I accepted donations/charity from others, I walked/biked more and drove rarely, and walking/hiking became recreation, along with the local library, making things using the tools I had at hand, and bargain hunting at thrift stores.
It's actually a pretty nice way to live in some ways (assuming you don't have to worry about where the next $x00 you need per month is coming from), because you find yourself less dependent on some outside purveyor of goods/services and find more satisfaction in determining how you spend your time and utilizing your native ingenuity.
There are limitations. Sometimes something expensive breaks and you're not sure how to replace/repair it. Sometimes you want to go spend time with friends an hour away, but you can't afford the bus fare. Or gas/insurance to keep a car running. But you can live this way for a while, particularly if there's a reason you're doing it that you really care about.
There's a hazard here, though, for people who are trying to get some enterprise off the ground: the more time is a valuable commodity for the enterprise, the better it is to burn cash to save it. It can be time consuming to learn to live very minimally, and it's arguably inherently somewhat time consuming once you do it -- walking/biking/busing often just takes more time, figuring out how to do/get something takes more time than paying someone who's already taken care of it. I think that's one reason a lot of people don't do it until they have to.
If you've got the motivation, though, you could begin seeing what you can really live without now, while you've got a job. Limit yourself to $500 for a month outside of rent/healthcare (maybe transportation to/from work on top of that) and see how it goes. Then try to cut it down. And start spending the time freed up by what you would have spent on entertainment/shopping to think, plan, and act about starting your business.
This is all about a partial risk minimization strategy focused on preserving resources by expending little except on true essentials, of course. There are a few other things to consider:
* your plan B if your startup doesn't work out. One thing you might want to do right now is perform a job search -- find out how easy/hard it would be for you to scare up leads and even get some offers if you were to have to do it. Knowing that can help you know how much time you might want to allow yourself to find another conventional job (1 month? 3 months? 6 months?) if you see your resources getting depleted and don't see entrepreneurial success in the near-enough future.
* the fact that risk minimization has diminishing returns. You can mitigate risk with insurance and savings accounts and networks of people willing to help you and exercise and clean and thrifty living. You can't stop the car you won't see, the natural disaster that stops the society you live in in its tracks, the hereditary ailment that robs you of health, and eventually, the changes that time will bring to everything you have now. This is at least part of what Steve Jobs meant when he said "You are already naked." Significant long-term risks of losing everything already apply. It might do you some good to face them now while you have resources and time to recover.
posted by weston at 3:37 PM on July 8, 2012 [1 favorite]
You will have six figures in savings and that is only two years of living expenses? Cut your living expenses, if you are in the USA you can live well spending far less than that, thus increasing the time value of your existing cash. You can do that before quitting your job, too.
posted by jacalata at 7:26 PM on July 8, 2012
posted by jacalata at 7:26 PM on July 8, 2012
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Also therapy can't hurt anyway since you are about to change your living situation, family relation situation and potentially job situation. Those are a lot of changes to face at once. Exciting changes though!
posted by bquarters at 10:03 AM on July 7, 2012 [2 favorites]