- How many months of financial buffer should I have before I jump to freelancing?
- I work from home and have been asked by the company to stop working remotely. i.e. I need to move to another (costlier) city. Personally, I am not willing to do so. Also this just seems to happen 5-6 months before my plans to leave the job and turn into a full time freelancer (with adequate financial safety-net).
- The figures below are just about accurate for comparison - however these are hypothetical figures. I also do not live in the US and also do not pay expenses in USD. Let's also assume that I cannot do freelancing on side.
- I have an average monthly expense of $3500 per month with an annual pay of $100K(before taxes). This expense includes insurance, mortgage, bills, food, etc... and a bit of buffer (5-7%) for "sometimes-overshooting expenses". I work from home and this amount also includes the cost of electricity and good connectivity (10% of total).
- Considering these expenses, my savings of $25K would suffice for around (6+1) == 7 months. Out of these, 7 months - I consider month 7 as an extra month to re-evaluate my position. And if no progress is made, this 7th month (last month) will be mostly dedicated to finding another job when funds are about to exhaust. i.e If I don't find a job in the last month (7th month here) - I'm broke. (And I am assuming that I am going to be lucky enough to not fall prey to any emergency situations)
- I have freelance experience from my early days - I started as a amateur freelancer - worked like that for a year and then joined a job - this is around 8 years back. I must say - becoming an employee at a corporate, after freelancing, is frustrating. And for many years I've felt that it was the biggest mistakes I made.
- Also, I'm not technically outdated - i.e. I have worked hard over the last year to get up to the mark (at least I think so). And anyways I am always eager to learn stuff required to get things done.
- It took me 10-11 months in my previous stint to generate the same $3500 per month - its not the equivalent of that today, but the exact amount I made that time. On an equivalent term, I guess it should be somewhere between $7-$9K per month in current times after about a year.
- But from what I see the freelance market has changed a lot over the last 8 years and has turned very competitive. I may take much longer time than expected - and I can endure that. But my concern is a deadline like "must be able to make a $3.5k per month before the 7th month.".
- Alright I am assuming no-income in between - which is incorrect.
- I might start with pocket-money income and gradually move upward. Optimistically speaking, it might be like - (consecutive monthly earnings ) - $500, 1000, 1000, 1500, 2500, 2000, (3000, 5000, 4000,...).
- And these in-between earnings will push the "last-month" and provide additional time up to 9-10 months. And this amount of time seems alright to me considering that I will break even and start making profits before I get pushed back into a "must-find-a-job" scenario.
- As a freelancer - Initially, I'm expecting 10-12 hour average work days (and occasionally 20 hour work days), for 25 days a month, half of which is spent on communications, marketing, finding work, proposals. And expecting between 4-5 fully-productive work (programming) hours spent every day on average. To be honest I have found that I cannot do more than 6 fully-productive programming hours on consistent basis (occasionally its fine).
- After about 18-20 months into freelancing, I would re-evaluate whether my position is satisfactory in terms of finance, work-life-balance, etc... or if I need to go back to a job again.
How many months of financial buffer should I have before I j
a guest Nov 19th, 2013 335 Never
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