How Do You Know When to Quit Your Day Job?
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The time may come when you are convinced that quitting your day job is absolutely necessary. If you are not obligated to support anyone, indifferent to your career, flush with cash, and in love with your eBay business, you are an ideal candidate for doing so. Unfortunately, few of us match this description. Before taking that big step, make sure there’s firm financial footing beneath your feet. You’ll need to consider the following.
What’s the financial effect? To know what effect quitting your job will have, you will need to do some financial forecasting, for both your business and you personally. (The basic principles of projecting income and expenses for your business are described in Recordkeeping.) After forecasting your eBay business income, estimate your personal living expenses for a year by making a budget based on the past year's expenditures (or average the past two years' expenditures, if possible). Include in your budget those costs that are now paid by your employer, such as health insurance. Based on that budget, will you have enough income from your business to pay your expenses? Even if the answer to that question is "yes," many financial planners recommend that you also have savings to cover all expenses for nine months, in the event that the business projections were too optimistic.
Beyond day-to-day expenses, also consider your retirement. How close are you to retirement age, and how will leaving your job affect your retirement? There are no bright lines for determining the right financial mix, but when you weigh these factors you should feel comfortable that you could weather a worst-case scenario, as in the eBay business not being the success you hoped.
What’s the psychological effect? How much of your identity is embedded in your current day job? Do you have friends there? Many departing employees are surprised how much they miss the social life provided by a regular job. How does your family feel? Will they support your decision and get behind your eBay business? Are people counting on you to take care of them? Again, there are no simple yes or no answers. You need to examine all of these personal factors before making your decision. Experts use self-actualization techniques to help you make these decisions. You can see how these techniques work in Barbara Sher’s book, I Could Do Anything If I Only Knew What It Was: How to Discover What You Really Want and How to Get It (Dell).