Going It Alone

Steven Aguiar  |  February 9, 2017

LAST YEAR, I MADE THE JUMP from employee to self-employed. Professionally, I felt ready. But what about financially? Here’s what I did to make sure everything went smoothly:

1. Eliminate Overhead. Success as a freelancer or business owner is never guaranteed. To give my business a chance to succeed, I wanted to save enough to sustain myself for at least six months.

My salary was fixed, so I had to make adjustments to my spending. I moved home for a year with my fiancée and commuted into the city. I ate breakfast and dinner at home, and started packing a lunch three or four times a week. Because I was in the suburbs, I went out in the city less. Developing these habits also prepared me for a leaner lifestyle once my salary disappeared.

2. Max Out Savings. Because my employer didn’t have a 401(k) program, my main retirement account was a Roth IRA. While living at home, I made sure to max out the $5,500 annual contribution for two years, so I wouldn’t be so concerned about saving for retirement during my initial months as a freelancer. I also invested any extra cash I wouldn’t need in the near future in a Wealthfront investment account, while opening a high-yield savings account with Ally for the funds I needed immediate access to.

3. Pay Ahead on Major Expenses. The best time to splurge on non-essentials is while you still have a fulltime job. If necessary, you can always stick it out for another paycheck or two to cover the cost involved. But once you put in your notice, that’s it. I took this time to book vacations, update my wardrobe and, most important, buy my fiancée’s engagement ring. If you’re going to treat yourself to one last spending splurge before quitting, I’d recommend picking up a new credit card that has a hefty sign-up bonus, so you get rewarded for all that spending.

4. Get Paperwork in Order. Setting up a small business isn’t hard, but the process tends to drag on. It took close to three months to set up an LLC, apply for a DBA (doing business as) and open a business checking account. I got the process started before I quit, so I could hit the ground running.

5. Check in Financially Every Month. Perhaps the smartest thing I did while preparing for self-employment: Hold a monthly financial check-in with my fiancée. At the beginning of every month, we reviewed the amount we each had in our financial accounts to make sure we were hitting our savings goals. It’s a practice we continue to this day.

Steven Aguiar is the founder of BlueWing, a B2B digital marketing agency. He majored in Economics and Hispanic Studies at Brown, and is a big fan of compounding interest.

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