What to Consider Before Becoming Self Employed

Leaving the rat race takes more than just money

Whenever I’m out on the town and socialising with my fellow expats (very rarely), I’m often forced into conversations I’d rather not be having. Although I’m only 30, I’ve already embraced a very ‘you kids stay off my lawn’ vibe that’s going to serve me really well in 30–40 years.

While talking to these whipper-snappers, the most common conversation that’s initiated by these excitable individuals is often their dream to become untethered to their employer and become entirely self-employed.

Whether this person has any business acumen or monitizable skills never seems to come up, rather the dream and their feeling that it’s right for them is always the focus of the conversation.

The most frustrating part of the discussion for me is always the part after we’ve reached the dollar amount it would take for them to quit their job. The figure is never even remotely close to what they’re earning currently, because for the pursuit of their dream, they’d be happy to cut back their living expenses to match the amount their hustle brings in.

Often this person works a side-hustle, and they’re hoping that this hustle will grow in value over time. Sometimes it’s blogging, YouTubeing, Upworking, or something else. Whatever it is, the earnings from this hustle is always small, but as soon as it hits the minimum threshold they’ve set in their minds, that person is resigning from their job.

While I’m standing in a bar talking to this person, my reaction is always one of silent support. But what I want to do is shake them by their shoulders and force them to come up with a plan that doesn’t ensure that they’ll be contributing to the growing number of underemployed people desperately trying to stay off the streets.

Here are a few considerations that that I’m not allowed to yell at young people in bars.

The Three Time Test

A lot of the people who have an earnings goal for their side-hustle have only ever factored in the minimum requirements to stay alive.

The most common number I hear from fellow writers is $1,200 a month. I don’t know why this is the magic number, but it’s the most common figure I hear on the streets. $1,200 is enough for people to pay their rent, eat something, transport themselves, and keep the lights on. Once these individuals hit that number even once, some of them quit their jobs that very day.

The first consideration I’d like to propose for these people is the Three Time Test.

According to the rules of the Three Time Test, nothing is real until it has occurred three times. I don’t tell anyone I like a TV show until I’ve seen at least three episodes because anyone can make something look good once. I apply the rule to my TV viewing, and that has absolutely no impact on my ability to stay alive.

Before quitting your job, apply the test to your hustle-based income. If you’re a blogger who’s website just earned $1,200 you should absolutely have a party, but it’s not time to quit your job. The reason is because this figure is untested, it only happened once. Also, allow your website to make your minimum threshold three months in a row, not three months in total. If during 12 months your website hits the goal three seperate times, the rule has not been achieved. Your website needs to make the minimum amount three times in a row before you can consider it to have actually happened.

This rule protects you from a fluke-based decision that leads to you losing your apartment.

The Truth of Humanity

The second consideration is to remember that you’re a human and we break down constantly.

If you’re earning the minimum amount you need to survive, you’re only one disaster away from financial ruin. What about when your car needs to be repaired? What about when you’re sick or injured and you need to be repaired? You can’t live your life so dangerously on the edge just because you don’t want a boss who yells at you for delivering reports late.

Whatever your minimum number is to survive, you should at least double it to ensure that you’re making emergency money that you can put away each month for the eventuality that something arises you could never have foreseen.

Investing is Not a Luxury

The third consideration also relates to money. If you’re earning the minimum amount to survive, that means you’re not investing.

The whole reason you quit your job was to be free, but now you’re shackled to your hustle and you’ll remain shackled to it until the day you die.

Presumably when you worked full-time you were contributing to a form of retirement savings scheme. Once you’re out on your own, you’re responsible for maintaining that scheme. When you’re young, you don’t give a second thought to the version of yourself that’s trying to make ends meet in your 70’s, and why would you? It feels a million years away. But talk to anyone currently living through their golden years and they’ll tell you that all those decades went by in the snap of a finger.

Believe it or not, your crappy decisions now are being paid for by the older version of yourself who’s living with the consequences. However unlike you, the older version of you can’t eat a stale loaf of bread for two days because they didn’t get the clicks they’d hoped for on their latest video.

Older-you needs real food and expensive medications to stay alive, and those expenses should be coming out of the strong investments you made in your youth.

Investing is a necessity for everyone, not a luxury for those who are well-born and Harvard-smart. If your number is $1,200 to quit your job, double it for emergencies and add an extra $1,000 for investments. Your number is now $3,400.

Creativity Comes from the Real You

The last consideration is a creative one. However much you may hate your job right now, it’s part of you and forms a lot of your experiences.

If you’re even considering quitting your job, you must clearly be successful at what your doing. Your blog has readers, or your channel has viewers, and that’s really exciting. But those people pay attention to you because you’re inspiring them with your life experience.

Life experience builds character and forges creativity, without this experience you wouldn’t be the same person. Once you quit your job your life becomes about your hustle, your thoughts, and the crippling need to generate rent each month.

Without all the other parts of life that generate the inspiration you’re usually drawing on, creating the same quality of content is about to get a lot harder.

Whatever your job is, it forces you out of bed in the morning and makes you go outside. Without a job to force you, will you get up before midday? Will you get any sun exposure at all?

No matter how much you hate your job, it’s part of who you are. So before you quit, you need to plan for the person you’re about to become. You also need to find a way to stay motivated and ensure that you’re getting out of bed each day before the afternoon.

We’re living in a time when it’s easier than ever to forge your own path, and when your times comes you should seize the day with both hands. But make sure you’re seizing it with a plan and with a real revenue stream that accounts for everything, including investments.

Now get off my lawn.

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.