5 Steps to Personal Finance Success When You Plan to Make It On Your Own

You are ready! You want to take the plunge and make it on your own. How do you stay on top of your finances while you undertake this incredible journey? Here are the 5 steps to get you there:1. Be sureYou are forgoing a stable salary. How does it feel? Can you and your family handle it financially and emotionally? Talk to your loved ones and your mentors. Give yourself 48 hours to a week to think through. Use the regret minimization framework from Jeff Bezos if it helps.2. Pick a datePick a date when you will do it. Write it down and tell three people about it. Don’t forgo the big payouts coming your way, like an annual bonus, vesting of stock options, or taking the severance if your company is planning to downsize. They really add up.3. Figure out the moneyFirst of all, think about how long are you planning to do this. In most cases, you need to give yourself at least 2-3 years to make this transition successfully. Do you have solid personal finances to sustain yourself until the first entrepreneurial paycheck arrives? Your early revenue will be small and inconsistent, and most likely 100% re-invested into the business.Face it, you will need to live your life differently. Re-assess your lifestyle. What are you willing to cut out? You may have to consider getting a roommate, getting rid of your car, or downsizing. Budget for the unexpected and leave room for some personal splurges.Figure out your business expenses for this period, like marketing, technology development, consultants, lawyers & accountants. Any income (e.g. freelancing) or funds made available (e.g. selling your car) could really offset the cash drain. Use our Hummings’ wizard to calculate the gap (how much savings you’ll be tapping into) and the amount of funds you need to set aside for this period.4. Clean up your financesBefore you quit your day job, clean up your finances. Pay off your debt. Check your credit scores. Rack up those credit card points and airline miles. Start saving more. Move your investments out of the stock market, so that you have more cash available. Work hard towards accumulating your “make-it-on-your-own” fund. The more your prepare yourself, the better you’ll feel when you actually take the plunge.5. Reward yourselfYou took the plunge! This is major! Treat yourself! Surround yourself with those who care about you and support you. This is just the beginning, but you did it! Now, keep doing it. Figure out what you need, watch your spend, and focus on generating revenues.We are coming out a new iPhone app to keep your personal finances in order. Sign up for Hummings at hi@hellohummings.com. Visit www.hellohummings.com to learn more.By Katherine Chen, CEO & Founder of Hummings