Grab Your Financial Parachute — And jump into the unknown!
Born in Mexico, Armando is a Global Citizen that supports the professional international community to become #FinanciallyFit. As a fitness enthusiast, he found a natural relationship between fitness and finance and that’s how the #FinanciallyFit Club began.
Get your financial parachute and jump into the unknown!
The last quarter of 2020 has already started. Crazy, right?
This means, we all have 3 more months to finish this 2020 strong. It’s up to you whether this year is a “doesn’t count year” or “the year where I [insert your own goal]”.
Since this month’s SheUp theme is “embrace the unknown”, I would love to share with you a 3-step guide on how to be ready with your financial parachute so you can jump into your new adventure. The approach will lean a bit more towards starting your own business but it can also be applied towards your own life goal that will make you say: This 2020 was a great year for me.
An entrepreneur is many times considered as an individual that loves to take risks for their ideas and passions. Someone who gives it all to make it happen. This statement is correct but not complete. Yes, you need to give it your all and commit to your objective but you also need to take calculated risks.
How do you make a calculated risk before jumping into the unknown? Well, the first step is to make sure that you have an emergency fund in case the business does not work or in case you have emergencies.
This amount of money is NOT for the business, it’s for YOU.
It should be liquid, meaning that you can access it at any moment if needed. However, remember that this is JUST FOR EMERGENCIES!
So how much is enough for a good emergency fund?
Well, it depends on your personal situation, but you can follow this basic chart as a framework and see where you fall in:
This means that you need to have the equivalent of at least 3-months and up to 12-months worth of expenses. For example, if you know that your lifestyle costs 10,000rmb a month (rent, food, insurance, or anything else that you consider absolutely necessary to live) and you have a partner but no children then you would need to consider 40,000rmb minimum as your emergency fund.
By having a sound rainy fund, you will feel safe to give entrepreneurship your all as you know that there is something to fall back on. Now that you have your safety net, you are ready to go to the next level.
This applies more to those in corporate jobs and thinking to jump into their own business.
I get it; Once you start getting paid for something that you are passionate about it’s very normal to feel that you have made it and that it makes no sense to continue working for an employer that keeps most of the profits, right?
At some point, it definitely makes sense to make the final jump and cut all the ties — But before you do that, there are some aspects that you need to consider.
Steady income stream:
Yes, I know that a salary is trading your time for money but it also helps you to pay your bills while you build your business. Consider starting your business as a part-time project until it’s enough to replace your current salary.
Medical insurance and other benefits:
Once you leave a company, you also lose any benefits they may have offered you so be sure to consider them as once you become an entrepreneur, you will be responsible to pay for them. Please, don’t make the mistake to walk around without a medical insurance. It’s terrible to read in WeChat groups that the friend of a friend got hit by an Eleme driver and now need to collect money to pay the bills as he/she was not insured.
Other expenses:
Are you going to need an office? Hiring someone? Register a company? Make sure to consider all those necessary expenses.
Even if it’s your company, that’s NOT your money. If you want to run a successful business, then you need to treat it like one. As a business owner, you can and should also pay yourself a salary and only live from that money. Do not mix and start using company money to pay for your personal trips or other expenses.
Yes, you can pay yourself dividends or create a structure where there’s a consultancy fee but make a clear distinction of what the company’s money is and what your personal money is. This way, you can see how healthy both accounts are.
Now you are all set and ready to embrace the unknown and I’m sure you’ll do great as now you have a financial parachute to fly with you in a safer way!**
Born in Mexico, Armando is a Global Citizen that supports the professional international community to become #FinanciallyFit.
As a fitness enthusiast, he discovered that both finance and fitness are more related than one may think. His goal as a financial planner is to coach and guide the millennial global community to build healthy money habits. Financial fitness has little to do with numbers and everything to do with habits and mindset.
Find #FinanciallyFit here!
www.FinanciallyFit-Club.com
LinkedIn: Financially Fit Club
IG: @FinanciallyFit.Club
Connect with Armando!
LinkedIn: Armando Flores Chiu
