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Why You Need to Organize Your Finances Before Becoming a Solopreneur

Self-employment is stressful enough already, why add financial stress into the mix too?

Are your days at your soul-sucking job almost up? 

Not too long ago, I fantasized about my final day in the corporate world. My mind would travel to another universe in which I was my own boss, set my own schedule, worked towards my own goals, and lived my best life.

No more working into the night (and the wee hours of the morning).

No more urgent projects with impossible turnaround expectations.

No more sleep deprivation.

No more canceling social plans because of work.

No more corporate B.S. 

Okay, it wasn’t all bad. I wasn’t shackled to a desk. I made good money. I had good coworkers.

But my work dictated every second of my life. Even on weekends, I’d find myself contemplating the week ahead and the insurmountable mountain of work I always seemed to have. It’s impossible to be so connected…so…plugged in for five straight days and then just expect to turn it off on a whim because the calendar says so.

That, among other reasons, was what led me to leave the corporate world behind and launch into the self-employment space. 

But my transition to entrepreneurial freedom was a gradual one. It took two years of planning and prep, sacrificing my already minimal free time. I knew I couldn’t just take the leap – at least from a mental perspective. To ensure clarity and peace of mind, I needed to inch into the pool rather than cannonball in. 

Plus, there was a lot to prepare for: strategy, pricing, scheduling, client acquisition, etc. But there’s a key aspect that needs to be at the tippy top of the corporate-to-entrepreneurship priority list: finances

Yep, finances. Money. Savings. Runway. 

As dull or dissatisfying as the corporate world can be, it’s steady. It’s reliable. It provides.

Self-employed ventures are exciting – tantalizing even – because they offer so much independence and freedom of choice. The ceiling? There isn’t one. But the floor…well…it’s a tenuous one. One wrong step and you’re taking a tumble through the floorboards into the dark, murky abyss below. 

Kind of scary, right?

A little, but there are three simple steps you can take to ensure your finances are organized before you take the leap into self-employment. In turn, you can be confident in your decision to pursue your entrepreneurial dreams. 

Build up enough runway

If you’re going to dive headfirst into the deep end, you should probably make sure there’s enough water there first. 

Having sufficient runway to keep you afloat while you get your business going also provides invaluable peace of mind. There are enough stressors in the self-employment world as it is – worrying about financial longevity doesn’t need to be one of them. 

In my case, I built up a runway of about a year’s worth of expenses. 

Prepare a budget

Budgeting isn’t the most exciting activity, but you can expect lifestyle changes once you transition to self-employment. That’s why it’s important to set a new budget based on your runway and/or new estimated income. 

That might mean paying less rent by moving into a cheaper place, spending less on meals out (less treat yo self days), and limiting impulse shopping. 

These are all sacrifices that come with blazing your own trail. For me, I elected to move out of my fancy condo that overlooked the city (I still miss that view), curtail my “entertainment” spending, and start cooking 95% of my meals. These were necessary decisions that prolonged my runway and allowed me to pursue my dreams.

Establish an emergency fund

Life is unpredictable. It’s full of unknowns. You don’t know what the future holds. You don’t know what the stock market is going to do. You don’t know when your car will break down. 

That’s why it’s important to be financially prepared. How? Maintaining an emergency fund.

They’re pretty self-explanatory – yet there’s a significant percentage of people who don’t have one. Per Bankrate’s Financial Security Index, roughly 28% of adults in the U.S. do not have an emergency fund. 

Entrepreneurs without a stable income are even more susceptible to the weight of unexpected costs. To counter this, you should maintain an emergency fund worth at least six months of expenses (not including your runway). 

Set financial goals

More likely than not, you already have several goals in mind for your new business. Onboard new clients, sell a certain amount of products, organize X, Y, and Z, etc.

Make sure you’re including financial goals within this list too.

Here are a few examples of my financial goals:

  1. Be profitable in any given month (i.e. earning more than expenses, including taxes)
  2. Earn $10,000 from writing
  3. Eclipse the monthly gross income I was receiving from my corporate job

Goals need to be specific, quantifiable, and relevant to your business. These keep me on track and moving in the right direction. 

Taking these steps will increase your odds of success and provide invaluable peace-of-mind while you pursue your personal and business goals.

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