Think You’re Ready to Be Your Own Boss? Ask Yourself These 3 Things First
To many Singaporeans, being your own boss can sound like a dream. Imagine being able to dictate the environment in which you work on a daily basis. No more boring cubicles or stuffy workspaces. Or never having to miss an important social engagement because your boss decided to throw a hissy fit at 7pm.
There are plenty of undergraduates who are taking the opportunity in university to test their business skills and see if they’re cut out to be an entrepreneur. There have been so many success stories of businesses started whilst in university that it’s no longer a stretch to say that you want to start your career before you even graduate. I also know many PMEs who, sick of having to report their every move to their bosses, finally threw in the towel and are now working as self-employed private tutors.
If you’re thinking of taking the plunge and striking out on your own, make sure you’re first capable of the following three things. Not fulfilling one of the below criteria could result in a very unpleasant financial situation.
Can you build a bigger emergency fund?
If you’re serious about starting your own business or become self-employed, you need to accept the fact that your income, at least at the start, is going to be a lot more volatile. This means you’ll need a larger emergency fund to tide you through the bad times. Even private tutors, whose income is relatively stable, go through periods of feast and famine—their students pile on the sessions when the exams approach, but during the school holidays their earnings become leaner.
For undergraduates and those that just graduated, planning in advance is even more important. Building up side income streams while you are studying can help you to buffer for the period when you are just starting up and getting your business off the ground.
If you are living on a fixed monthly salary, you can get by with an itty bitty emergency fund. Three months of your monthly expenses can be enough to keep you out of trouble, and even if you haven’t been particularly diligent about maintaining your emergency fund, there’s always the possibility of asking for an advance to keep yourself out of debt should unexpected expenses crop up.
There’s no hard and fast rule governing the amount you need in your emergency fund, but as a general rule of thumb you should aim to save up at least 6 months’ worth of monthly expenses—12 if your income is particularly volatile. If saving up that much money sounds like an impossible feat, you might not be ready to cut it out on your own just yet.
Are you disciplined enough to work on your own?
You might not realise it yet, but being a student is the best time to practice and hone the skills needed to be your own boss. Don’t take managing projects and schedules as a chore, but instead use it as an opportunity to build systems and processes that will help you should you choose to strike out on your own after graduation.
Self-motivation is one of the biggest challenges self-employed people face. If you’re consistently unable to motivate yourself to work and schedule your time accordingly, your work-life balance is going to go out the window as you crawl along unproductively, wondering why you can’t just get paid to waste time.
Bosses might not inspire you so much as strike fear and loathing into your heart, but being under authority does make sure you get the work done—if you were doing absolutely nothing you’d have found yourself out on the streets a long time ago.
When you work for yourself, however, there’s no one peering over your shoulder to check that you’re not spending all your time on Facebook. Wasted the entire day watching cat videos on YouTube? You’ll just have to forgo your weekend or risk losing your clients, then.
Can you keep your financial liabilities under control?
Unless you’re able to build a successful business in a relatively short space of time, self-employment is going to be big risk if you’re a person with a lot of financial liabilities. If you’re dealing with a home loan, and perhaps a study loan as well, you’re going to have to think much harder about quitting your job to go freelance than a single person who’s still living with his parents.
Of course, few people have absolutely no financial liabilities. But those who can make the transition to self-employment with the greatest peace of mind are those who can reduce their liabilities or at least keep them under control.
Before you start out as your own boss, it’s a good idea to stop any unnecessary monthly spending by cancelling unnecessary gym memberships and subscriptions and review your existing expenses to see if there’s any way you can live more simply. Having few liabilities will make it easier for you to ride out the tough times before your income stabilises.
For students or fresh graduates who are new to the workforce, this is a good juncture to point out that if you are planning to be your own boss, taking on any additional financial obligations can be a slippery slope that might be hard to manage later on. Needless to say, credit cards and any loans can wait till a more appropriate time.
This article was contributed by MoneySmart.sg. Any questions or comments should be addressed directly to them.