Do you want to learn how to quit your job and become self-employed? Are you wondering how do I quit my job and work for myself?
Perhaps you’ve finally found your passion, and it means running your own business. Maybe, your side hustle has grown so large that it’s time to make a decision between keeping your day job or turning your side hustle into your full-time career.
Whatever reason you may have, I recommend taking some steps so that you can prepare and make the transition to self-employment as easy as possible.
I have been self-employed for around 8 years now, and there were several things I did to prepare for the switch.
I was a little scared to leave my day job in order to work for myself full-time, and preparing helped me with the transition and made me feel more comfortable.
Of course, not everyone has the opportunity to prepare for self-employment, as I know that some people may be laid off from their day job, maybe you have to quit a toxic work environment, and so on.
But, anything that you can do to prepare will make the switch as easy as possible.
Learning how to quit your job and become self-employed is hard work, and there are a lot of steps a person needs to take before they think about leaving their current job.
Even though I am going to walk you through steps that will teach you how to prepare to quit your day job and work for yourself, there’s no single right way to do it.
Depending on your situation, you may take slightly different steps. That’s okay, and you’ll have to find out exactly what works for you.
However, by taking your time to become self-employed and preparing yourself, you may have a much smoother transition.
How to quit your job and become self-employed
Step 1: Create your business on the side of your day job
If you have the option, I highly recommend starting your business on the side of your day job.
This is because you’ll still be able to rely on the income from your day job, meaning there is less risk if your business doesn’t turn out to be what you thought it would be.
Starting your business on the side will allow you to see if it’s:
- Something you want to do full-time. Is this a business idea you will actually like once you’ve started it? Self-employment isn’t for everyone.
- A realistic way to make an income. Will you be able to live on your business income alone?
- A business that will work out or not. Is this a business idea that will succeed?
Starting your business on the side of your full-time job can reduce a lot of stress. You will be able to build up your business to the point that you’re earning good money before dropping your stable, full-time income.
For me, I had my business on the side for around two years before I decided to make the leap into self-employment.
There is no right or wrong amount of time for each person – just what you think is good for you. Two years may be too long for some people, and it may not be long enough for others. Like I said, there’s no set amount of time.
I recommend reading 15 Home Business Ideas & The Free Courses You Need To Get Started. Here’s a quick list of work from home jobs that you may be interested in:
Step 2: Determine what you’ll do without your day job benefits
One of the major perks of full-time employment are the benefits.
Full-time benefits are something many people rely on, and you will most likely lose them when you start working for yourself full-time. I know many people struggle to leave their day job because the benefits are so valuable.
When you quit your day job, it will be your responsibility to take care of health insurance, retirement, and so on.
It’s much better to do your research and price out how much things like health and dental insurance will cost before you quit your job. This will give you a much better idea of what your self-employment budget will be.
After all, your expenses may be a little higher than what they are now, so this helps to eliminate any surprises that you may come across.
Health insurance is probably the biggest hurdle for self-employed people. However, there are some options you may want to explore, including:
- Find an insurance plan on the marketplace at Healthcare.gov.
- Find travel medical insurance.
- Joining a health share. These are not a perfect solution, as they are not required to pay for your medical bills. You can learn more here – We No Longer Have Traditional Health Insurance – Liberty HealthShare Review.
- See if you can use Cobra for a short time frame. This is where an insurance company is required to give you insurance even after you leave your day job, but it can be very pricey.
- If you have a partner who has a job with health insurance, you can see if you can join their health insurance plan.
- If you belong to a professional group or association for the industry you’re in, they sometimes offer health insurance options for their members.
All of the options above will have pros and cons, and not all of the options will make sense for you.
Take time exploring each one, from how much it costs to if there are any restrictions for the type of care, before deciding which is best for you.
If you want to learn how to quit your job and become self-employed, taking your time to research benefits is a very important step.
And, unfortunately, health insurance is a hard topic that doesn’t have a single easy solution for everyone.
Step 3: Save for an emergency fund
An emergency fund is extremely important when running your own business.
This is because you may have bad months, a seasonal business, and so on, and you don’t want those lower income months to cause you stress or unhappiness.
An emergency fund is extremely helpful when you work for yourself. It can come in good use if you ever have a bad month (or multiple bad months), if you decide to change direction with your business, and so on.
When owning a business, you never know which direction your business will go or if you will be forced to pivot.
By having an emergency fund, you will feel a little less stress so that your financial troubles are not impacting your business in a negative way.
How much money should I save before quitting my job?
The amount you need to have in your emergency fund before quitting your job depends on what your budget is, so it will vary from person to person.
Most experts agree that having 3-6 months worth of expenses saved in an emergency fund is a good idea. However, self-employed people should have more like 6-12 months worth of expenses saved. That’s expenses, not income.
That may sound like a lot of money to set aside, but it can give you a lot of peace of mind if you have a few bad months.
This is another reason why I recommended the first step about starting your business on the side of your day job. You will ideally be earning more money during this period, so it will be easier to save for self-employment.
That period is also a good time to pay down debt, especially high-interest rate debt. It means you’ll need less saved for your emergency fund and have one less liability to worry about.
Related content: Why You Need An Emergency Fund and How To Start One Today
Step 4: Don’t forget about taxes and the legal side of running a business
No one likes to think about this side of running your own business, but it is an important area.
When running your own business, you will have taxes and legal issues to think about.
Many of the newly self-employed underestimate what their taxes are, and they are shocked when they realize that self-employed people should save around 30% of their income for taxes.
The amount is so high because you are both the employee and employer when you’re self-employed, meaning you have to pay taxes on both ends.
You may also need to apply for an EIN (employer identification number) through the IRS, which is a number you use when filing and paying your taxes. When and how to pay estimated quarterly taxes is another thing you should research.
Then, there’s also needing to legally organize your business. Many self-employed people create an LLC (legal liability corporation), but you may want to look into that versus an S-Corp.
Legally organizing your business separates your business and personal assets. It means if something happens to one, the other is protected from recourse.
Paying your taxes and setting up an LLC aren’t difficult to do, but I highly recommend that you take your time to research the best way to do it. Don’t let this part of running your business prevent you from starting one.
If you don’t feel comfortable setting everything up on your own, you can contact an expert, such as a lawyer and/or accountant. They will help you register and organize everything so your business is legit.
I also recommend using someone who specializes in your field, as they will have expert advice to give you.
Another thing you will want to think about is possibly contacting a lawyer as well to see if there are any legal issues you should be aware of when it comes to your business.
Step 5: Quit your day job
This is the step you’ve been waiting for!
The final step when learning how to become self-employed is to one day finally leave your day job.
When you finally feel prepared and ready to leave your current form of income, you should figure out the correct way to leave your job, set a final work day, and turn in your notice.
Have fun and good luck with your business!
How do you transition to working for yourself?
If you want to know exactly how to quit your job and become self-employed, there’s no exact way to do it. I’ve talked to successful self-employed business owners who quit their day job on a whim. Others waited years to quit.
It is much easier to make the transition if you have done things like paying down your debt because it’s one less thing hanging over your head.
Having a decent emergency fund is also very helpful in reducing the stress of becoming self-employed.
It may sound like being self-employed is scary or stressful (it can be at times), but it’s mostly amazing. You are your own boss and can follow your passions. I genuinely love being self-employed, and I don’t think I’d ever go back to working for someone else.
There are so many reasons to quit your job and start a business, but I recommend taking your time to walk through the steps I’ve listed above.
If you’re the type of person who is scared to quit your job and start a business, the steps I’ve outlined will make sure you’re fully prepared for self-employment.
Do you want to become self-employed? If you’re already self-employed, what other tips do you have for someone who wants to make the transition?