It’s about this time of the year, I look at my finances and think wow, if I could just sell this much stock all year round I could afford to go full-time jewellery business. And I start thinking about the new year and how much I could pack in if I just did jewellery full-time.
So other than pie in the sky dreams of what could be, I thought it would be useful to have a little chat around what else you should consider before you quit the day job.
When talking about going full-time I often I hear the phrase “I just want to make enough”. And when prompted with ‘And what is enough’ the response is equally vague ‘oh, you know, bills and stuff’. It seems we are way less specific than we need to be with our desires. If your ‘bills’ are a five bed inner Sydney mansion and your ‘stuff’ is the latest Prada weekend bag each season that’s going to look quite different to someone’s ‘bills’ of a one-bed outback apartment/shoe box and their ‘stuff’ is enough suncream and coconut water.
And ‘enough’? As in “to the required degree or extent”? If your going for vague is it so bad to say “I just want to make heaps”? Personally I’m changing my motto to “I just want to make plenty” it doesn’t sound greedy but it sure feels more optimistic than ‘enough’. Plenty for me feels both abundant and achievable. But it’s still not that specific, measurable or timely. But semantics aside, what does your specific enough actually look and feel like?
So, to conquer the vague ‘enoughs’ (or even ‘plentys’) here are some steps to help firm up your “required degree or extent”.
Step 1
As always, is work out where you are now.
Incomings – what are you already bringing in, on average, this might be a 9-5 gig or just the regular sales you are making.
Outgoings – what are you already committed to spending, rent/mortgage, bills, telephones and internet, food, shopping, car and travel, drinking, holidays, taxes, insurances, going out, etc. A personal budget here will make your life so much easier. Apps like pocket book and even the automatic categorising from your bank can make tracking this a whizz.
Step 2
Look at your incomings and outgoings and figure out where you can increase or decrease. But be realistic, you might think you’ll have heaps of time to sew your own clothes with the fabric from the bargain bin, but would that time actually be better spent earning or cooking meals with simple ingredients rather than relying on take aways four nights a week? Will your home electricity and internet bill increase if you quit the 9-5 but will you save money on a daily commute?
Step 3
Add it all up. For us our base expenses including housing are 1.65 times my significant other’s month income. The 0.65 is my enough amount plus the taxes that I will pay on that. Which roughly means I need to bring home the same as my significant other for us to maintain our current lifestyle. There aren’t that many changes if I quit the 9-5, a reduction in travel and going out but the majority of our outgoings are housing, bills and groceries which are pretty constant.
Step 4
Add in your business expenses. If bringing home the equivalent of my other half’s salary is the goal then I need to add onto that all the business expenses to get to a turnover or income goal. Materials, electricity, marketing, supplies, tools, depreciation, staff, taxes, service fees and charges, etc. Your list needs to be quite extensive to make sure you really understand ‘enough’. You won’t cover every expense in your list, so pop in a contingency amount of around 10-20% to give you a buffer for the unexpected.
Step 5
Build yourself a safety net, before you jump feet first from one money maker to another, save yourself a comfortable amount of expenses – as a minimum I’d suggest 3 months up to about 6 months depending on how long you think the venture will take to really get going. This should ease the pressure in the first few months but this isn’t an excuse to kick back and relax.
Step 6
The last step, set up and track. There is no point having gone through all of this to ‘set and forget’, managing your money situation is the most important step of all. Knowing each week or month how much you need to bring in for your outgoings is super important. Any extra can be put aside for next month or top up your safety net. Because sometimes you’ll get sick, want to take a holiday or want to contribute to your retirement. Plan long term and hit those money goals!
How does this measure up to what you previously thought might be ‘enough’? Certainly helped me see things a bit more clearly. PS. my significant other is a primary school teacher not some company CEO (thankfully I may well achieve 0.65 of that salary). Right now I’m off to find some more ‘plenty’.
PS. It’s not my intention to do jewellery full time, I seriously love finance, accounting and helping micro-business owners with their finance systems.