“When I was young I used to think that money was the most important thing in life; now that I am old, I know it is.” – Oscar Wilde
If I were to leave my job in the City to start a business, I would first need to raise finance and feel financially secure. For me, this meant saving enough money to be able to live with no income for 12 months.
Surprisingly, this was relatively straight forward. Instead of taking out a bank loan or sourcing seed funding, I opted for the one method that was 100% within my control.
I saved up! Here’s how I went about it.
1) I worked out my current outgoings. I looked over my last three months’ bank statements, standing orders and direct debits and calculated everything from rent to food. The Prince’s Trust provides a free Survival Budget Excel template here.
2) I cut expenditure. Rather than penny-pinching, I sought to cut costs from the big outgoings, for example:
- Transport – saving £100 per month. I purchased an entry-level road bike (B’Twin Triban 500, £300 inc. accessories from Decathlon) and began cycling to and from work. I now only use the London underground for occasional travel.
- Mobile phone contract – saving £34 per month. I purchased a rolling contract from ID once my two year Vodafone contract expired. And yes, this meant resisting the urge to upgrade to the latest iPhone!
- Gas and electric – saving £30 per month. I used MoneySavingExpert’s cheap energy club to compare my existing tariff with other options on the market. As it turned out, the best deal was with my existing supplier so I simply changed tariffs, also earning a £50 Amazon voucher.
- Food – saving £50-100 per month (and eating healthier). I employed a virtual assistant from Habiliss to do my weekly shopping, from finding recipes and meal planning through to ordering the food for delivery via Sainsbury’s online. Not only did this stop me from habitually eating out most nights of the week, but I also benefitted from planning meals as opposed to buying ingredients for single meals, and avoided impulse purchases – damn you Nakd bars! (This actually provided inspiration for my business venture but more on that later.)
3) I changed my habits. I’d estimated my biggest expense aside from rent, and perhaps most uncontrollable, was going out. A few quiet pints would easily turn into four am and £120. Plus the hangovers would typically sway me from wanting to do anything productive on Saturday or Sunday. To curb my spending, and have the energy to explore potential business ventures, this was one habit I’d have to change. I stumbled upon One Year No Beer, a community dedicated to helping people change their attitudes towards alcohol, and decided to give it a try. Four months without alcohol and my bank balance, as well as my overall mental and physical states, were looking a lot healthier.
4) I started saving. After cutting expenditure, I recalculated my projected monthly outgoings at £1249.00. To live for 12 months with potentially no income would mean that I’d need £14,988. On top of my existing savings, I’d need to save around £600 per month for 12 months. I set up a savings account and a direct debit on the first of each month for £600 from my current account and left it on autopilot. (I used Funding Circle as my savings instrument as it provided the opportunity to lend to small businesses in the UK along with a projected annual return of seven percent.)
December 2016 came around and I’d achieved my savings target, woohoo! Plus, with help from my virtual assistant and my reduced alcohol intake, I was eating better and feeling great.
P.S. You may prefer to work on a side hustle alongside your job until it’s generating a livable income and then take the leap. There are whole communities dedicated to this such as Chris Guillebeau’s Side Hustle School.
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