Should you quit your job to follow your passion?
If your answer is yes, I am curious to know if you have a BUDGET for PASSION. Read on to find out how budgeting for financial wellness can help you sustain your passion and keep doing what you LOVE.
My passion is to help people realize their dreams.
In the last 10 years, I’ve helped thousands of people create their budget and get real about achieving their dreams. As a Financial Wellness Coach, I notice that clients find it comparatively easier to set a budget if their dreams are concrete, such as buying a home, a car, paying down an existing debt, taking a training course, going on a two-week vacation, saving for their children’s education, or for retirement.
Often, the price tag is set by others or external circumstances. It is like going to a shopping mall - all you need to bring is your wallet and make sure there is enough to cover the cost. It’s all quite black and white.
Yet, when it comes to your passion… it is filled with vibrant colors and lots of variables. What is the price you want to set on that?
The type of passion I am referring to here is an activity or work task that you really enjoy doing. You want to make a living out of it, and it feels fulfilling when you are aligning your heart with your actions. It feels so good that you want to quit your less creative, less fulfilling job today.
Often, when people quit their jobs for their passion, they feel this extreme pressure, especially in the beginning when they are developing their new passion business. Just imagine, you are putting your heart and soul in your new business, and, at the same time, you are worrying about your existing savings and whether it can support what you love. It’s a lot to worry about and plan for, all at once.
In Susan Ward’s article about “Why Small Businesses Fail and How to Avoid Failure”, she pointed out that about 96 percent of small businesses (1–99 employees) that enter the marketplace survive for one full year, 85 percent survive for three years, and 70 percent survive for five years (Key Small Business Statistics). Approximately 7,000 businesses go bankrupt every year in Canada. These are staggering numbers!
What can you do to prevent this from happening? Or, what do you need to know so you can make a calculated risk? Here are three simple steps to help you budget for passion:
Step 1 - Identify your core values
Values? Yes! Knowing whether your passion is aligning with your core values is like adding extra fuel to your motivation fire. It helps you to stay on track and better focus on what’s true to you, rather than getting distracted by the voice of your inner saboteur. This knowledge will make you more successful in the long run! Trust me.
Values are who you are. Values demonstrate how you show up every day, and they are so imbedded in you that you honour them consciously or unconsciously. For instance, when you feel excited, highly engaged, fulfilled and balanced it is because you are living your values, ones such as family, friendship, adventure, peace, and growth, just to name a few. In contrast, when you feel negative emotions such as being lost, disengaged, and angry, it is very likely that your values have been stepped on.
To find your true core values, you must be willing to dig deep, and not simply pick words from a piece of paper that sound good to you. There are many methods and exercises available to help you discover your core values.
Step 2 - Clarify your priorities
In your life right now, what is more important than, or just as significant as, pursuing your passion? If you jumped in with both feet, what are the potential impacts on these other areas in your life? Can you accept the level of these impacts? What are your priorities?
Let’s take a pause and clarify your priorities. For example:
One of your core values is family and you want to be close and available to them. However, the passion you want to pursue requires you to move to a different city/country. If you honour your values for your passion, you may be stepping on your value of family. This may cause stress, anxiety, disappointment, etc.
In this case, you must do some inner work on assessing the weight of all your priorities. You may make a list of pros and cons or use a scaling method to measure your satisfaction level in pursuing each “priority”.
Step 3 - Calculate your budget for passion
Now that you have done steps 1 & 2, you are confidently giving yourself permission to pursue your passion. Let’s get REAL with your BUDGET! With a plan in place, you can work towards ensuring you have sufficient funds to move forward and sustain your passion.
This is my simplified Budget for Passion formula:
a. Project the initial budget for your passion
Initial budget = Time required to build your business x Current cost of living
i.e. $6,600 = 3 months x $2,200/month
It is important for you to decide how much time you are allotting yourself to NOT get paid. Any income that flows in during this timeframe is like bonus.
Based on the example above, you allow yourself 3-months to purely focus on building your new business. This means that you expect to not get paid for 3 months. If it costs you $2,200 per month to sustain your current lifestyle, your initial budget will be $6,600 for the time required to build your business.
Then you need to factor in the expenses you expect to incur from creating and operating your business. For instance, how much will you spend on marketing materials, logo/web design, business bank account fees, meals and entertainment when meeting potential clients, and/or attending different events? Let’s budget all of these costs at $200 per month, or $600 for the duration of your 3-month start up time.
So, before you make the important decision to quit your job, you will need to ensure you have a total initial budget of $7,200 savings in your bank account.
b. Identify your current financial position
Current financial position = Current savings – Initial budget
i.e. ($6,200) = $1,000 - $7,200
Once you’ve figured out your projected initial budget, it is important to do a reality check on where you are financially. A simple way to do this is to take your current savings and subtract the initial budget.
Let’s say you have $1,000 in liquid savings that is readily available to you. In this case, it looks like you will need to save an additional $6,200 before quitting your job.
c. Know your cash flow
Cashflow = Total net income – Total expenses
i.e. $1,000 = $3,000 - $2,000
Once you know what your current financial position is (i.e. $6,200 savings required to reach your budget), it is extremely crucial for you to get a clear idea of how much money flows in and out each month. Most importantly, you want to determine if your monthly cash flow is positive or negative, and by how much.
In this example, you have a net monthly income of $3,000, we then subtract your monthly expenses of $2,000, which leaves you with $1,000 in positive cash flow each month. This means your timeline is just over 6 months to save roughly $6,200 towards your budget for passion.
There you have it, a simple budget for your passion.
To sum it up, in order to successfully sustain your passion, you must perform a balanced dance, led by being highly aligned with your core values, while having the support of a practical budget and a strategic plan for a sustainable cash flow, to ensure your commitment to follow through with each graceful step.
I would love to hear your thoughts and perhaps your best practices on how you budget for passion. Please share your insights in the comment boxes below.
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