My Self Employed Dilemma
When I quit my job to work for myself I was terrified of not having my weekly paycheck. My husband has always been self employed, but I always had a steady paycheck.
That first winter was rough. Winters have always been the lean times for my husband’s business. We save in the summer and it gets us through the winter.
Now, almost four years later, we have almost a years worth of expenses in our savings. But I can’t seem to make a decision to use any of it. Money sitting in the bank equals safety to me.
I know there are so many other things I could be doing with that money; investing it, even taking a vacation. I feel like I can’t spend it because what if?
This is the self-employment dilemma. There are feast and famine months. The goal is to save during the feasting months so you can live another day when your starving. But what if you get so worried about the famine that you don’t ever spend?
This blog is about enjoying life while making that million. While I don’t think I am sacrificing much right now, I know I’m not enjoying life as much as I could be. I know I’m not building my business as fast as I could if I was willing to take more risks. Holding onto money with a tight fist doesn’t fit either part of that goal.
I spoke to a fellow entrepreneur who was amazed that I let that much sit in the bank. He said that he keeps about one month of expenses and invests the rest into his business. His business is very successful and earning multiple six figures per year.
I like to think I take calculated risks. I consciously make choices when I spend. But where is the line between safety and risk? I couldn’t do what my friend does, but what should I do?
After talking it over with my husband, we decided to set up a system. (I love systems! 🙂
Our System: Research
I tried to figure out how low our famine months have been and how long they’ve lasted. Things start to slow down around the holidays at the end of November. They usually pick back up by March or April. In thinking back I think the leanest month we have ever had was $700 total in income. Normally our lean months are between $2,000-3,000.
The worst streak we’ve had so far was a calculated one. When I had my daughter in May of last year and I took about 4 months off from work completely. My husband took about 6 weeks off during what happened to be his the busiest time of year. Then his brother/business partner had a baby two months later and took time off too.
Normally summer is when we pile away money for winter, but since we made less we saved less. Even during our leanest times we’ve only needed about $12,000 to get through the winter. Last winter we were still all set and didn’t have to touch the emergency fund.
Our System: Creating the Rules
So Our regular monthly expenses are about $5,000. If we had to cut to the bare bones we would be around $3,750 per month.
So We decided our system rules will look like this:
- We have our six-month emergency fund that we do not touch. (only for unforeseen circumstances)
- We have our Monthly Fund (link) but we cap it at $12,000. ($3750 minus $700 = $3,000 per month for 4 months)
- After $12,000 is in the Monthly Fund we create a new fund, the Surplus Fund, which holds the surplus until we figure out what to do with it.
So After $12,000 we can decide what to do with the money. We haven’t settled on a plan for it, but I think it will be a combination of vacationing, saving up for a newer vehicle (Honda Pilot), investing, and adding money to our businesses.
Once we go through the lean months we will have to push the monthly fund back up to $12,000 before we do the extras. So right now our monthly fund sits at $12,000.
The First Use of the Surplus Fund
Since I met Chris Guillebeau I’ve been thinking more about traveling with the kids. I really want to stop thinking that I will travel when they are older and start just doing things going places now. As I said before I really want to visit Spain for at least a month.
So we just booked a cruise as a ‘starter trip’. We’ll see how our one-year-old and three-year-old do going to Honduras and Belize. We’ve already been before so I know it’s safe.
The cruise will cost about $3,000 total for the four of us. My brother in law is going and so are other friends and family. I am so incredibly excited about the trip.
But still, I keep the back of my mind keeps wondering if something bad will happen now that we’re spending some of the safety net. The only way to know is to try things. Since I want to live an extraordinary life while I can, I need to push out of my comfort zone. I should be happy that outside of my comfort zone means spending cash on a vacation. 🙂
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