This is part 3 of a 4-part series on quitting your day job and making a living doing what you love. If you haven’t yet, read part 1 here.
In January 2008, I quit my day job. I didn’t win the lottery. I didn’t get investors or any financial windfall. My fledgling freelance videography business had zero income. ZERO $$$! I had less than $4,000 in total assets, and no prospects for clients.
In short, I quit my day job before I had an income to replace it.
From all accounts, I was not ready to quit my day job back in 2008. But I did. Was it irresponsible and reckless? Perhaps, but it was a necessary step to successfully leaving my day job for good. (In January 2017, I will have been self employed for 9 years!)
For ten years, I had tried unsuccessfully to quit my day job and become self employed. It wasn’t until I pulled the complacency of a “steady paycheck” out from under me until I finally got the fire to live my life on my own terms. It was the most rewarding experience! And it was a little terrifying, too.
Moving from absolute reliance on my paycheck to confidently leaving my cubicle behind for good felt daunting. It felt impossible.
However, there are a few solid strategies that I used to free myself from my day job long before I had a replacement income. I used these four key strategies to quit my day job, start up a freelance videography business, then build a blog with my wife that started earning us a six-figure income in just over two years.
Strategy #1: Reduce Expenses
The first thing I did was to take a ruthless look at my monthly expenses, and cut as many as I could. Yes, that meant that I lived on a very strict budget.
For Tracy and I, that meant canceling cable TV, and sticking with a basic cellphone, foregoing the sexy new iPhones everyone else carried with them at the time.
We also moved to a smaller place with cheaper rent, and relied on public transportation. We stopped eating out at restaurants and got furniture and other household essentials from Craigslist when needed.
For 13 months, Tracy and I lived in a studio apartment, living on just over $30,000 – for the year. But we also had lots of time to work on our online business, and in the very next year, our annual income jumped to $121,000! (When was the last time you received a $91,000 pay increase?)
It was SO worth the sacrifice! After 13 months of sharing a cramped studio apartment (with the occasional cockroach) and not spending any money, we moved into a spacious apartment home, got our sexy iPhones, and caught up to the rest of our friends – but we also had no debt, and we didn’t have to spend 40+ hours per week at a job we hated in order to enjoy these things.
One year later (2013), we upgraded our lifestyle again with a new car and a 4-bedroom house (that we rented). Now we own our own home.
Remember that the goal is not to live an austere life for the rest of your life. You are simply reducing your expenses temporarily, in order to also reduce your income requirements so that you have more time to work on your business.
Once you no longer need to rely on a day job to buy the things you need and want in life, you can acquire these luxuries (larger house, top-of-the-line gadgets, 1000+ channels of cable TV, etc…) You will enjoy these things more when you don’t have to spend so much time doing what you hate in order to get them.
Can You Live On One Income?
If you live in a multi-income household (i.e.: both you and your spouse work full time), it might be possible to live on just one income.
I know it sounds impossible at first, but if you fully embrace strategy #1 and ruthlessly eliminate non-essential expenses, and you follow the other strategies in this guide, you might find that you can squeeze by on just one income for a year or two while one of you works full time on the new business.
If not, perhaps you are just a little short on living expenses from one income, but you can make sufficient money by working part time – preferably with a freelance side business or a job.
The goal is to free up your time so that you have more of it to work on your business. If you have your partner’s support, then consider a temporary lifestyle “downgrade” while you work toward living better in the future.
Strategy #2: Tackle Your Debt
In early 2009, before we launched our online business, we were drowning in debt. It was smack dab in the middle of the big economic recession. Friends were being laid off from their jobs, and one day, my wife got her pink slip too.
There was no way we could both live off of my freelance videography income, which also took a hit due to the recession. In fact, her unemployment combined with my unreliable videography income wasn’t even enough to cover our basic expenses.
For years, our debt was holding us back. We were determined to pay it all off, but Tracy’s layoff was the straw that broke the camels back. We simply couldn’t afford debt payments anymore. We were beyond being able to dig ourselves out of the pit of debt we had gotten ourselves into.
So we looked into various options for getting out of debt (I will outline them below) because we desperately needed help and despite our best efforts, we weren’t able to dig ourselves out of that hole.
When you need to get out of your day job, you absolutely must reduce your expenses. However, hundreds or even thousands of dollars in debt payments each month will hold you back indefinitely. It could take decades to pay off all your debts, and you’ll be walking a financial tightrope the whole time. You can’t focus on improving your life, your circumstances, or creating abundance, when you are shackled by stressful debt.
You have five main options for tackling your debt. They are:
- Pay Your Debts Off Over Time: Suck it up and pay your debts off over time by yourself. However, if your income is low, and your debt is massive, you may never be able to pay it off – especially if you consistently add to your debt.
If your debt is growing month over month, I would suggest looking at the other options outlined in this guide.
However, if you are determined to pay off everything that you owe, then pay the minimum payments on all of your credit cards and other debts until you have built up a significant savings account – at least $1000 to cover a car repair, sick pet, or emergency trip.
Once you have saved up enough money to weather an unexpected financial setback or two, then work on paying off the highest interest debt first.
- Beg Your Lenders For Better Repayment Terms: Option 2 is to call up each of your lenders and beg them to give you better repayment terms, such as lowering your interest rate. And let me tell you, it’s often futile to do this.
Getting them to lower your monthly payment is a bad idea, too. You’ll only lengthen the amount of time (by years!) that you will be in debt, and you’ll pay even more in interest.
- Debt Consolidation: Basically, you call up one of these non-profit debt consolidation services and they work with credit card companies and other lenders on your behalf to negotiate lower interest rates, lower monthly payments, and a definite end date for your debt.
Typically, you’re in debt consolidation for anywhere from 3-5 years, depending on how much you owe and how much you can afford to pay each month.
The benefit of this is that you will have an exact due date for being debt-free. The bad new is that your credit history will still take a hit, you won’t have access to any credit cards or lines of credit (which may or may not be a good thing), and the biggest drawback is that you’ll still be saddled with hefty monthly debt payments for up to five years!
- Debt Resettlement: This is not for the faint of heart or non-confrontational types. Essentially, you stop making all debt payments for up to six months. By that time, your account has been sent to collections and you are now working with a collection agency, and not your original lender.
You can then attempt to negotiate a repayment plan, and if you are a rock star negotiator, you might be able to get out of debt much quicker than debt consolidation, and end up paying less money over time. Here’s why this can be effective: Debt collection agencies buy up bad debt for pennies on the dollar, so they still make a profit if you are willing to pay a portion of what you owe. Your original lender has already written off the debt.
However, debt collectors are profit-driven, so they will try to intimidate you to pay the full amount. It’s their job to squeeze you for all they can. But at some point, it’s worth their while to settle. If you are not a rockstar negotiator, you can work with a debt settlement company, though many of these companies are not necessarily on the “up and up”.
In my opinion, if you’re at the point of debt resettlement, you might actually be better off going with bankruptcy instead as it’s quicker, and you’ll recover quicker (both credit score and financially).
- Personal Bankruptcy (Chapter 7 or 11): Yes, it sounds devastating, but it really isn’t that bad. Bankruptcy is quick and straightforward. You simply call up a reputable bankruptcy law firm. You provide them with all of your financial details, and information on your assets. Your lawyer then determines which type of bankruptcy you qualify for.
Chapter 11 is essentially debt consolidation. You and your creditors agree to a monthly payment plan, and you make payments (typically 3-5 years) until you are debt-free.
Chapter 7 is the “better” form of bankruptcy. This is complete dissolution of debt. With Chapter 7, all of your debts are absolved (with some exceptions, such as student loans), and within 2-3 months, you are 100% debt-free.
In most cases, you will keep your car, and no, you will not be forced to auction off all of your possessions. While a bankruptcy stays on your credit report for 10 years, you can get a platinum cash-back or rewards credit card with 0% introductory APR the very day your bankruptcy is official. You can easily get a car loan in a few years (no shady deals – a straight up car loan), and you can qualify for the same mortgage rate as somebody without a bankruptcy in as little as 5 years.
The key is to rebuild your credit immediately after bankruptcy. Take the credit card offer, but then pay the thing off every month!
None of the above options for getting out of debt are necessarily pain-free. But you need to do what it takes to get out of debt ASAP, be it debt consolidation or filing for bankruptcy. You need to start living your life again, with much less stress, so that you can work on living the life you want.
The important thing after tackling your debt, regardless of which strategy you use, is to learn your lesson and never repeat your bad-debt history.
While you are going through the process of getting out of debt, learn financial strategies, live according to a budget (and stick to it), and be sure to rebuild your credit with a new credit card and other line of credit or small loan. But be sure to carefully manage these so that you don’t end up back where you started, with zero options for getting out of debt the second time.
If you can settle your debt or pay it off quickly, do so. If not, talk to a bankruptcy attorney and set yourself free.
Quick Disclaimer: Discuss your unique situation with a financial expert or attorney, as laws change, or may be different in your area. When going through any sort of debt-elimination, keep your 5-year plan in mind.
Strategy #3: Start A Freelance Business
Another strategy for leaving your day job before you are ready is to monetize your skills and start up a freelance business. Six months after I quit my day job in January 2008, I was making a full time income as a freelance videographer. (It really only took me two months after I moved to a city that had enough freelance work for me – more on that in Strategy #4).
If you have a valuable skill, then work your way toward living off the income of freelancing that skill.
Shortly after I quit my day job, I sought out freelance videography gigs. I had two years of film school experience under my belt, and five total years of film and video production experience. I had just purchased the bare essentials for equipment (prosumer camcorder, shotgun microphone, video light, tripod) – all of it used on eBay.
Perhaps your skill is graphic design, or social media, or carpentry. It doesn’t matter. Just find a way – any way – to get paid for doing what you are good at.
A freelance business has a couple big drawbacks, however. For once, you only get paid while you work (no paid vacations or sick days). So I recommend looking for ways to leverage your freedom as a freelancer to diversify your income. It’s better if you are not 100% reliant on one source of income – such as your freelance business (or day job).
For me, freelance videography was an excellent solution. I charged anywhere from $400-$500 for a day of shooting. That meant that I didn’t need to work every day. Just a couple gigs per week was all it took to replace my salary. That left anywhere from 4-5 days (sometimes I worked a half/day gig), where I could devote the entire day to writing content and building traffic for our fledgling blog that now earns us a six-figure income.
Also, I avoided taking on editing work (as long as I could afford to say no to it). Shooting is a one day job, and that’s it. Editing what I shot, however, made more money, but it also meant that I had no time to work on my online business.
Strategy #4: Flee The State (Or The Country)
The final strategy I will talk about is a bit more drastic. This involves moving, either to a different city, state, or even country.
I used this strategy twice. The first time was four months after I left my day job in 2008. I was living in a small town in Vermont, and rapidly running out of money. Vermont is not a good state to live in if you want to be a freelance videographer and eat dinner every night with a roof over your head.
So Tracy and I packed up our stuff and moved to Chicago. Chicago was a much larger market for video work, and the cost of living is much less than pretty much everywhere in New England. The Chicago video production market was also much easier to break into than much more crowded and competitive markets in New York and Los Angeles.
Moving to Chicago meant that I could reduce expenses, live frugally but comfortably, and have ample opportunity to score freelance videography gigs.
Just two months after our move, I was making a full time income as a freelance videographer. I found all of my gigs on Craigslist. Tracy quickly found a new job, since at the time, there were a lot of job opportunities in the city.
The second time we used this strategy was late 2010, after Tracy had been laid off from her job and her unemployment was running out. Despite a six-month job search, she was coming up empty-handed. This was right in the midst of the economic downturn.
We were rapidly approaching the fall and winter slow period for my videography business. We were months away from having no income (or very little income), and no end in sight until the next spring.
So we decided to sell everything we owned (yes, even my videography gear), and move to the Yucatan Peninsula in Mexico where we could live off our savings that we created from our sold possessions. While there, we would devote our lives to turning our little green smoothie blog into a business that could support us.
In Mexico, we were able to live comfortably on less than $1300 per month, and we had all the time in the world to build our online business.
We were only making about $350 per month in total income from our blog when we boarded the plane to Mexico, but three months later, we were making almost $2,000 per month from it, and no longer living on savings.
After six months of living in Mexico (and working our tails off on our blog), we were able to afford to return to Chicago and live frugally (we lived in a studio apartment, although we could have lived in a much larger house if we stayed in Mexico) for another year while we built our income to the six figure range – just eight months later.
Moving out of state, or even out of the country, can feel drastic. It is. But sometimes it’s a solid strategy for being able to quit your job sooner rather than later (later almost always means never).
And you don’t have to consider it a permanent relocation. Anywhere from six months to a year might be enough time to give yourself a chance take your blog from hobby to business, while having an awesome cultural experience that will forever change your life (in the best way).
And if you make a living with a blog like Tracy and I do, you can live absolutely anywhere in the world you want!
I wish that there was a magic button that would allow you to quit your day job right now and start doing what you love every day, and get paid for it starting tomorrow.
Sadly, there isn’t. So you have to make some decisions, some of them difficult, and prioritize working toward your future success above keeping up with your friends and neighbors lifestyles.
I utilized all of the strategies in this guide from one time to another, and I would not have included them if they weren’t strategies I’ve used myself.
Ultimately, you must blaze your own path toward entrepreneurship. However, you can see that you don’t HAVE to be stuck in your day job forever. You don’t have to delay your dreams. You can start living your life today!
In part 4 of this series, I’ll share my thoughts on when to quit your day job. How can you tell if it’s the right time? When can you be certain that you are ready – financially and mentally? Keep reading:
About Davy & Tracy
Hey there! We're Davy & Tracy Russell, the husband-and-wife team behind this website. We help trailblazers break through barriers so they can turn their passion into their life's work through entrepreneurship. How can we help you?