The importance of finding and following your calling in life is an area that I have talked about recently. And some of you have asked the very pertinent question; “how? ― how do I actually go about pursuing my calling?”. Indeed, this question can be particularly tricky if self-employment emerges as the path forward. Making a career change from traditional 9-to-5 work to being self-employed is never easy and we will each face constraints that are unique to our individual situations.
What I want to share with you today is a simple model for thinking about the practicalities of making such a career change within your own personal circumstances.
The Financial Triangle
The practicalities of career change could be expressed in terms of three interconnected elements that are closely related: (i) calling/passion, (ii) cost base (iii) day job. Being able to effectively navigate a career change depends on clearly understanding and defining for yourself what each of these elements means.
Calling refers to the fact that we all have something ― a passion, a vocation, a craft ― that we will each have our own unique attraction to. Whether it is bee keeping, architecture or carpentry, we will all have something that we are fundamentally excited by!
The problem that often arises with pursuing one’s calling is that it may not be immediately income generating. As with any new business venture, there will be a natural lead time to revenue generation. Preparing for this will then require one of two things:
(i) Building-up sufficient savings to support yourself during the ramp-up phase; OR
(ii) Developing your new venture to a level that is income generating before you quit your day job
This then brings us to the next element ― your cost base.
(II) Cost Base: The minimum you need
Your cost base is the income you need to live, based on the lifestyle that you have defined for yourself. Your cost base will include basic necessities such as rent/mortgage payments, food and utilities, which we all need to survive. It will also include “wants” that are discretionary and that depend on your individual preferences.
Carefully defining your cost base is an extremely important prerequisite to quitting your job in order to pursue an independent path. Having clarity on exactly what you need to live and how much it all costs is the foundation for being able to effectively budget for the ramp-up phase. It goes without saying then that the lower your cost base, the less binding the financial constraints of career change will be.
It is not uncommon for people transitioning to self-employment to report how much they were able to reduce their cost base once they had gone through their finances with a fine comb.
(III) Day Job
Your day job is what pays for your current cost base. Day jobs come in all shapes and sizes these days. Some will allow a lot of opportunity for time outside work. Others may allow more opportunities for financial savings.
The specific nature of your day job will determine whether you are more time-rich or cash-rich and this will be an important consideration for how you decide to manage the ramp-up phase of your independent venture. For example, someone who is more time-rich might find it easier to develop their new venture to a stage that is income generating versus someone working 80-hour weeks that may be more cash-rich.
Bringing it all together
There is no success-guaranteed method for making the transition to being self-employed. The journey must begin with discovering what you are most passionate about ― this is fundamental. Once you know what you really want to do in life, it is then a game of managing the financial triangle so that you can wholeheartedly immerse yourself in what you love.
If you have recently made a change towards a more independent life, please do share your story and what worked for you!