I quit my job, and I feel fine. It's been an eventful couple of months here, and I'm fixin' to tell you all about it. See part one for the beginning of the story.
It was time to move on and focus on all the important projects that my job was distracting me from, but there was one single question that was getting in the way: "How can I afford to do this?" Here's how I planned, budgeted, mapped out how best to make it happen.
The Great Budget
I should start out by divulging that I have a pretty sad history with money. My credit is poor, I enjoy spending the money I have (and even some that I don't), and the most I've ever had in a savings account up until this point was about $1,000 (and that lasted maybe a month). On top of that, I've spent the last several years paying down some bad debt and I have about $30K in student loans for a degree I never completed. The good news is I've been getting a lot better thanks to the examples of some very frugal people around me and a regular budgeting cycle.
I've been in the good habit of revisiting an annual look at my budget every six months, and I've got a very complicated spreadsheet to help me do it. So in January (about the time I was wrestling with the decision to walk away from work), I took the opportunity to map out the year as if I was planning to quit.
Along with the typical monthly expenses like utilities and student loan payments and so and and so forth, I make sure to forecast for any big expenditures that I know are going to come up. The key here is foresight. Everything from gifts bought for friends and family to trips we're planning to take to annual things like an eye exam.
Also important was factoring in any known or projected income. This included tax returns, freelance revenue, and my share of revenue coming in through app customer support. I also knew that I was expecting to pay myself at least a little bit for my work on Maker's Nation once things got off the ground. Things get a little nebulous here, though, and that's what was most scary. Income through my leadership of Maker's Nation depends on my ability to fundraise enough to meet our budget, and freelance revenue depends on my ability to find and secure project work (neither of which I have any experience doing).
This particular round of budgeting was even more difficult because at the time I was dealing with hospital and doctor bills from breaking my wrist over Christmas. But once I input everything I could think of, I was able to get the big picture of how my finances were going to pan out over the next 12 months. And at that point, I could start tweaking.
When it comes to my monthly expenses, I've learned (the hard way) that if I don't plan on miscellaneous or fun spending, I end up spending it out of some other bucket anyway. So it was really important to me to include a monthly budget for those extra things (whether it's happy hour with a friend or a new shirt). There are also a few regular expenses that I wasn't willing to give up on, like my $40/month haircut. But I was willing to give up on the $35/month wine club, so there's a balance to be had.
The other priority for me has been improving my credit score, so I made sure to plan for double payments on my two last credit cards to get them paid off within reason. Based on my projected income and expenses, I could then tweak my job's end date. If I stayed one extra week, would that effect things overall? What about leaving a month earlier? The great thing about a magical cross-referenced spreadsheet is that changing one cell updates the entire thing, and I have a graph that shows my unspent money at the end of each month so I can gauge how things are mapped out.
After all my tweaking was finished, I had managed to eke out a plan that would see me through to the end of the year and allow me to leave my job at the beginning of April. The month of July was going to be dicey, but I felt much more confident that I could make it work. (And hey, if I need to sacrifice a haircut one month to save 40 bucks, I can handle being shaggy.)
The Great Boons
I had set up a few rules for myself as I moved forward, and I think those were really helpful in setting the stage for success. First, I promised myself that I would track my spending for each monthly expense and put anything leftover into my savings account for that dicey bit down the road. I also updated my spreadsheet at the end of each month with my actual income, which reflowed things to help me make sure I was still on track. There were three other key changes that really set things sailing:
- A House in Vancouver: This was something that we'd considered for quite some time, but moving forward on it sooner really helped me save a bundle in rent. While there were quite a few costs involved in moving, I discovered that auto insurance in Washington is much cheaper than in Oregon. Utilities will probably work out to be more expensive, but in the end it's still saving quite a bit of money.
- A Larger Tax Refund: I had done a preliminary estimate of what my tax return would be, but prepping the whole deal revealed that I'd have an extra $150 or so to work with. The downside is that I had to push that inbound money back a month due to delays in the IRS updating necessary forms (silly fiscal cliff).
- A Medical Overpayment: How thrilled was I when I realized that I'd overpaid the orthopedic surgeon by $700?! It was one of those classic billing cycle lapses, so that surprise refund check in the mail allowed me to breathe a huge sigh of relief and sock it into my savings account.
Now I fully understand that these last three are unique to my own situation, and I doubt that anyone else considering this would be able to claim the same benefits, but sometimes you just need to take that first step into the unknown being as prepared as you can be, and then things like these come up and reassure you that it's all going to be okay.
So with my finances as in order as they could be, I gave my notice, worked my last day, and headed home for the great uncharted territory of full self-employment. It was exhilirating and a little scary, but I was ready! And then? Well, then, something happened that I didn't really expect. Coming up in Part Three, I dive into "The Great Trap"…