If you are in a 9-5 job and in a position where you want to create your transition plan to work for yourself, you’re not alone. It’s been almost two years since I left my job to work full-time in my business. When I first started working for myself I used my savings and contract work to manage my expenses but went back to full-time employment to rebuild my savings. I learned a lot and today I want to share my personal story of transitioning from a 9-5 to working for myself full-time.
Building your business and creating a financial safety net to quit your job is all about creating an exit plan.
If you’re looking to create your own financial exit plan this episode is for you.
In this episode, you’ll learn…
[00:36] How working and building your business at the same time can help you plan your exit strategy and how I did it
[04:10] Six steps to help you prepare to leave your job and go full-time into your business and how they worked for me
[06:26] 1. Separate your personal and business finances to prepare yourself for effective decision-making and financial success
[07:42] 2. Prepare your business finances by creating your budget and breaking it down
[09:25] 3. Determine what your ideal financial safety net looks like that will help you feel safe to leave your job
[10:30] 4. Know your numbers and how much you will pay for hidden numbers, such as taxes, PTO, and healthcare, and incorporate them into your business budget.
[15:19] 5. Determine your paycheck and the scale to use as you move from bronze, silver, to gold budget in your business.
[17:29] 6. Be clear on your income goal; If your income goal is $100,000, determine what your income will allow you to do and how much you need to make in a month.
Tune in to this episode of Money Files to learn more about the six steps and how you can implement them to create financial safety to leave your job and make a smooth transition.
Are you ready to shift your relationship with money? Apply to work with me, and let’s start working towards your financial goals.
IF YOU LOVED THIS CONVERSATION ON HOW TO USE FINANCIAL DREAMS TO PAY OFF DEBT AND SAVE MONEY, CHECK OUT MY EPISODE ON GIVING YOURSELF PERMISSION TO GROW YOUR BUSINESS AND TAKE ON A FULL-TIME JOB!
Transcript for “How To Prepare A Transition Plan To Work For Yourself Full-Time”:
Hi, and welcome to Money Files. I’m Keina Newell from Wealth Over Now. I work every day with professional women and solopreneurs to help them get out of financial overwhelming shame so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Hello and welcome back to another episode of Money Files. So today I want to talk to solopreneurs or anyone who has a side hustle, they work a nine to five, but you’re considering leaving your job and I want to talk to you about creating financial safety to leave your job. As you know I was once a nine to five employee and it’s been almost two years since I officially left my job. So just to kind of run it back a little bit, I started my business in the summer of 2018 and at that time I was a vice principal and I completely left my job and decided that I was just going to go all in on business for myself. I had the idea of financial coaching, I was really excited about it and I started my website and I waited for the people to come.
And if you know anything about building a business, they don’t just come because you publish a website. So I was living at that time off my savings, I was doing some contract work and then I figured out, oh wow, savings takes a really long time to save, but you can spend it really quickly. And what I ended up doing was I ended up finding another full-time job probably about a year later and just was very clear that I was building a business at the same time that I was working. And this time going in, I knew that I was going to create an exit plan for me to go all in on my business. And when I say all in, I just mean that my business was the one supporting me financially. And you can actually listen to episode 18 if you have any thoughts about working and building your business at the same time, especially if you are doing something unconventional like I did.
Like I stepped away from my job and then I went back and got a job and worked my business at the same time. But just for reference, I called my business my full-time job and I called my nine to five, my W2. I called that my side hustle. And that shift was good for me. I was very clear with my employer about what I wanted, but I realized, I was coaching in one of my friends groups a couple weeks ago that I actually don’t think I’ve gone into the financial piece of preparing to leave my job. And one of my clients is actually starting to work for herself full time in January. And I was just talking about a lot of things with her this past week and I said, oh, you need to know this as well because when you are in business for yourself, like a dollar is not a dollar, it’s more like 50 cents if you’re really good at managing your money.
And the thing that I always like when I’m working with solopreneurs or anyone who has like a side hustle while we’re working on finances, I want them to see their numbers differently because it’s not the same as being paid from in a W2 role. Even I would say for like $10.99 contractors where they don’t take out taxes. Like you should be thinking differently about your money because there are things that you have to do for yourself that your employer would normally do. But when you are paying yourself, when you are working for yourself, you are your employer and you are the employee. And so you have to be able to look at like, okay, how do I operate as the employer and how am I fiscally responsible? And then as the employee, how do I manage my money in a fiscally responsible way?
So I just want to share with you, like I said, what I did in order to leave my job. So like I said, I had some savings before I actually went full time into business for myself and I used a lot of that savings and then ended up going back to work and then rebuilding that savings and creating a path for me to leave my job. And so I gave my two week notice and I quit my job in January of 2021, but I put in my resignation in December of 2020. So last January was the first January that I was fully working for myself. And then January of 2023 will be coming up on two years that I have fully worked for myself. But in order to prepare to leave my job, there were some numbers that I wanted to know that I needed for that financial security and safety.
And I know some people listening to this, you are willing to be probably a little bit grittier than I was willing to be, but there were things that I wanted to know I could do. I wanted to know, I could have a plan to contribute to my retirement. I wanted to know that I could prepare to fail in my business, whether that was $0 months or preparing to sell new things. I wanted that security. And so the thing that was going to give me that security was knowing that my finances were managed well and I never wanted to be selling from a place of scarcity because I needed money. So there were things that I prepared myself for financially so I wouldn’t be in that place. So in the year 2020, I made a little over $100,000 in my business that year.
And a lot of the money that I made in my business that year, I was saving so that I could have money for business expenses. I knew that I would be able to have money to pay myself. I was paying for some investments in my business. So I had a purpose for my cash flow and my business at the time. And then on my W2 side working, I was using that money to really live off of. So the first thing that I want you to know is that I want you, like if you are in this position where you want to create this financial safety to leave your job, my first pointer is to make sure that you separate your personal and business finances. So I want your business finances to be in a business account and I want your personal finances to be going into an account for your personal finances.
If you for some reason haven’t set up like your LLC, whatever that looks like, and you’re like, Keina, I can’t open, I don’t have no EIN number, I can’t open up a business account, just put your business money in a separate account. I see too many of my clients that the money is co-mingled and the first thing we work on together is making sure that their money isn’t co-mingled. So if you can make sure that your personal and business finances are separated, that’s just going to set you up to be financially successful because your brain is going to see the money as two separate things. it’s also going to prepare you to make decisions as a CEO. Remember when I’m talking about you being an employer. And so it’s going to help you not see the money that you’re making in your business as your money.
So first step is make sure that your personal and business finances are separated. The next step that I want you to take is to prepare your business finances. So when I’m talking about preparing your business finances, the next thing that I did was I made sure that I had a business budget. I knew how much money it was going to take me to actually run my business. I knew what my expenses were from my website hosting to subscriptions like Canva. I had all of those things in one place because it let me know annually what am I spending in my business and then I could break it down monthly. So I was able to look at, like I said, little subscriptions or investments that I wanted to make, but just like in your personal life, your business needs a budget so you know how much it costs to actually operate your business.
So I would say like that’s step number two is to make sure that you actually have a business budget. The reason you want that business budget is right now, if you are working and you haven’t left your job, you probably just allow yourself to spend money on things because you do have cash flow. But as you shift over from being a W2 employee and just solely working for yourself, money is going to have to operate a little bit differently for you because of the fact that you’re going to start paying yourself or you’re going to be paying yourself more consistently. So you want to understand your numbers in that way to make sure that you have that financial security and you can create that financial security by having a plan. And if you prepare your business numbers in advance when you transition to work full time, it’s not going to feel like there’s a learning curve.
It’s just going to be the thing that you’ve already done. Step number three, I want you to determine what’s your ideal safety net. So for me, I knew that on my personal side I wanted at least three months of expenses saved. And then on my business side, I know I wanted three months of business expenses and I wanted three months of my salary that I needed to pay myself. And so when I had all of those numbers in place, I knew that I would feel safe to leave my job. I knew that I had three months to be able to sell and the money to continue to be replenished because I felt really good about my selling. I felt really good about what I was offering. And so that provided me that safety net to be able to tell my employer, alright, I’m giving my two weeks notice and this is when I’m quitting my job.
But I knew what I needed in order to be able to walk away from my job that felt financially secure and I knew how to create that financial safety on the other side for myself. And then I would say, the next thing you need to do, or the fourth thing you need to do is know your numbers. So I talked about having a business expense plan or a business spending plan, but the other thing that I want you to know, especially when I’m talking about a dollar not being a dollar when you’re in business for yourself, is that when you are employed and you have a W2, there are things that your employer pays for that you may not consider. There’s a total value proposition that every employee has and it includes retirement and it includes PTO, it includes healthcare benefits, and the hidden numbers, the ones that I think we don’t pay attention to are like the cost of healthcare.
So for me, I’m a single woman and I didn’t have a spouse or a partner to be able to roll me into their healthcare plan and don’t have kids. So there was no like family plan that I was just going to be able to say like, okay, I’m leaving my job and my husband, I know that I’m already taken care of because we have a family healthcare plan. There was no safety net for me there. And so what I had to consider in terms of knowing my numbers was how much am I going to spend per month on healthcare? And I came out of the education system where for the most part, healthcare is like heavily subsidized. Like you may have been paying $50 a paycheck to contribute to your healthcare.
And so now I was going to be responsible for paying healthcare, but it wasn’t going to be just $50 per paycheck. Healthcare could range from $400 a month to $1,200 a month depending on what you need, could even be more than $1,200 a month. And so it’s really important to understand how am I going to pay myself enough? How is my business going to make enough that I can also make sure that I have adequate healthcare and the hidden cost of what was in my total value proposition? What things are going to have to roll over to me? If you have, like I know for instance, one of the things I’ve talked about with my client who is going to start working for herself in January, is she does have a family. And so she’s always carried the healthcare. And so like that is an expense that I want to make sure that she fully understands what that’s going to look like for her and her family and how much that’s going to be and how can you save for that in advance.
I know when I was thinking about healthcare, that was something that I wanted to have. I think I went into my first year of entrepreneurship basically making sure that I had six months of healthcare already set aside. I didn’t want that to be something that was ever in default because I wanted to make sure that if I needed to go to the doctor, that I was able to go to the doctor and I had those choices. So that was something that I really, really thought about in terms of hidden numbers that I want to factor in because when you think about how much you’re currently making, let’s say you’re being paid $2,000 every two weeks. Well, if your healthcare is $1000 a month, you’re going to need another $500 every two weeks to make sure that you can pay your healthcare.
And something that I did in terms of thinking about my healthcare was I put that in as a business expense. And so after talking to my accountant, that’s what we decided. But that was also how I went and adjusted my business budget. And that’s something that I wasn’t doing beforehand when I thought about my business expenses, but it was something that I had to consider as I thought about that transition to working for myself full-time. Also along the same lines here when I’m thinking about hidden numbers is I thought a lot about my retirement. I’ve always worked for companies that had a really good employee match. It could have been anywhere from 4 to 6%. And so that was basically free money that I was getting, in addition to if there was any type of employer contribution. And so because my financial health is really important to me, I also, in knowing my numbers created a plan for being able to contribute to my retirement and being able to make that something that I did starting out and having a goal to say, I can contribute $100,000 a month to my retirement and what is that going to look like?
And those numbers are factored into how I decide to pay myself. It’s factored into my personal budget. It’s a shift that in transitioning from being a nine to five W2 employee to fully working for yourself that I would encourage you to consider as you’re mapping out whatever your plan is. And the next thing I would encourage you to think about is to determine your paycheck. So you’re going to be in a different position when you go to work for yourself because you’re going to be paying yourself and right now you get paid a certain amount by your employer and that amount feels really comfortable. But what I want you to consider is the same amount of money that I need to make when I start working for myself full-time. And one of the things that I always encourage my clients to do as we’re thinking about this is I tell them to create a gold, silver, and bronze budget.
And really I just call it a personal paycheck because we’re adding up the numbers to see how much do they need to pay themselves. I always tell them to start with silver. So let me start there. I tell them to start with silver. When I think about silver, that could be the current budget that you’re on. It could be like the current salary that you have. Probably when you think about being able to pay yourself, you at least want to be able to pay yourself what you make. And so from there, what you can do is, I say like scale back to bronze. If you had to think about what numbers you would shift, what numbers would you shift in order to be able to pay yourself? If you knew like, okay, maybe I can’t pay myself $5,000 just yet, but I could pay myself $4,000 a month.
Like how does your budget look different from bronze to silver? And then your gold budget is where you’re moving towards and how much you want to be paying yourself. So I like to have these three budgets just so you can be able to have this landscape of what you can actually do right now. And then also being able to think about where do you desire to go? Because when I’m working with solopreneurs, when I’m talking to solopreneurs, I want you to have consistency with what you pay yourself. I don’t want you to be paying yourself based off of the number in your personal bank account being low. So that’s why I’m telling you to determine your paycheck and what you want to be able to pay yourself because it’s a number that you’re going to need in order to complete the last and final step.
And the last step is to have an income goal. So when you think about an income goal and you think about being able to pay yourself consistently, and when you think about being able to pay your business expenses, when you think about being able to pay these hidden costs like healthcare or being able to say within your business, it’s like what is your income goal? Be really clear with your income goal in your business. You may think that you know your income goal is $100,000. Well what does that $100,000 allow you to do? How much would you actually be making per month? If you had a goal of $100,000, you would be making like $8,333 a month on average. So if you think about that, you are also going to be able to look at your business budget and say like, okay, if I was making $8,333 a month, can I pay my business budget?
Can I afford to pay myself? Can I afford to save for taxes? So you’re going to be able to answer some questions for yourself, but also if you have that income goal in advance, you can start working towards hitting that income goal. So you just heard me talk about if your goal was $100,000 for the year. Right now where you are, you could start working on creating those $8,000 months with consistency. And so as you’re creating those $8,000 months with consistency, you’re building your belief and your ability to create money, and you have some data in your business to show like, okay, I can create this $8,000 a month, now I can start to go back and intentionally prepare my business finances for my departure, for my job, and knowing that my business can fully take care of myself.
But overall, when you’re thinking about creating this safety to leave your job, it’s really just about planning in advance. If you can plan in advance, it makes everything else feel so much easier because you’re just creating that path for how you want to manage your numbers. So the episode today is just short and sweet because like I said, I just realized that I hadn’t really talked a lot about how I left my job and created that financial safety for myself. And so if you are in a position where you’re like, yes, Keina, I am in a W2 job, but I want to be able to create that transition plan, I want to know that my personal finances are managed well. I want to make sure that my business finances are managed well and not co-mingled, then I’m the coach for you. So we can actually go through and make this plan so that way you can fully transition to work for yourself.
I’ve had several clients by way of working on their personal finances that they’ve decided that they wanted to more heavily monetize something that maybe they were kind of dabbling with. My client, Renee, she’s not fully working for herself, but she works part-time for herself, she works part-time for a school district, but she’s been able to realize that she can create that time freedom that she desired and she’s building a pathway to have some multiple streams of income. My client, Martha’s getting ready to leave her job. So it’s just fun to be able to help people realize that you can pay yourself, especially when you know how to manage your money well. So if this is work that you want to dive into and you want to shift how you’re managing your finances, you can go to my website, www.wealthovernow.com/appointment and apply to work with me. And until next week, have a great one.
Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.