My Last Paycheque (For Now)
There have been a few things I can always count on in my adult life:
1. Ponytails and topknots save time and bad hair days
2. Never put your winter clothes away until the end of May when you live in Canada
3. A bi-weekly paycheque
Now I can cross that last one off my list.
I will say this time and again I am grateful to have been given a severance. Looking for work when you’re mid-career takes a long time. It just does. I have too much experience to hustle after entry-level jobs, but not enough experience to just announce on LinkedIn “I’m looking for work, recruiters, come at me!”
I do have enough experience to start a coaching and consulting career, so I’m jumping in head first to the world of entrepreneurship. I’m now a media consultant and media coach for hire (and damn near close to building a client base). But after a lifetime of relying on steady income and building my monthly budget on that, how do I set up my finances to make the most of the savings I do have and not end up living in my parents’ basement (again)?
When I first lost my job my dream scenario was to find a new one by the time the severance pay cheques stopped coming. This way I could just straight-up invest the severance payout in a surprise money move. But for some reason, the right job hasn’t materialized. So now I’m faced with a finite amount of savings and an unsure future. How do I still turn this into a money move I can be proud of?
As I do with all tough things, I turned to my friends for help. I’m blessed with a friend group of supportive, successful and highly organized women who have been running their own businesses for years. I’m well aware of the hard work and planning involved through years of watching on the sidelines. Now I’m at the starting line of my own business and need advice on the specifics on the difference between getting paid and paying yourself. Here’s what they told me to get started:
1. Don’t rely entirely on your business at the beginning
Building a business takes time and periods of steady income will be inconsistent. Start with a part-time job so you have some money coming in and slowing down the withdrawals from your savings. Even if the pay and skill set is less than what you had before — just get some income coming in. And it should still give you the time and flexibility to focus on building your business at the same time. Plus, it’s easy to leave these bridge jobs in moments when your business is doing well.
2. Reduce your living expenses to the part-time salary
This will take some sacrifice, but I totally get the idea. At this point in time the part-time job is the steady, reliable income. The business income is less consistent so it should be kept in savings to be used in emergencies or the occasional splurge (like a trip or bathroom reno or a mental health break to recoup after a period of busy business work).
3. You don’t have to register your business or incorporate right away, but you should get an HST number
This advice is specific to Canadians, but the idea is the same. Investigate how your business income will be taxed and work that into your fee. This will save you from getting dinged at tax time (and takes the pressure off justifying everything as a write-off).
4. Separate your business and personal accounts
Have a high-interest savings account with at least six months expenses set aside and pay yourself from this account. The six months expenses is the basement, so if you can have more in this account (say you have a major severance, inheritance, real estate sale, lottery win — any windfall that gives you the cushion to make this change) keep as much in this account as you can. And shop around for savings accounts that give you the highest interest available but don’t charge for access.
5. Have a mix of long- and short-term work
The short-term work might not pay as much, but the pay comes in pretty regularly. Bigger projects might pay more, but take a long time to pay out. Also, ask for 50% upfront so you’re not working for free at any point in time.
I’m sure as I continue to pursue this idea-turned-business I’ll come back to these early tips and adjust as needed. But for now it feels good to have a semblance of a plan while I stumble in the dark looking for the next step.
*This article is for entertainment purposes only. It should not be considered Financial or Legal Advice.
