Q: I have been wanting to spend more time with my family and start a small business to continue to earn some income. Every time I feel I am ready to quit work, something comes up that will make me hesitate and then I will postpone my plans. Right now, I think I have enough money saved up to cover for unforeseen expenses. But how do I really know if my savings are enough? Is there a good formula to check against? - Susan
A: Many people who have been working for a long time are looking forward to when they can ditch their usual routine of braving the traffic to get to work at 8 a.m. each day. Whether you call it burnout or mid-life crisis or just a welcome change - such a move is appealing.
Getting out of the rat race to stay at home or go into business will need a lot of preparation though, and this is why many choose to continue working. Quitting work means the loss of a steady and guaranteed income stream so before taking the big leap, one must ensure that he has enough saved to help him cover his cost of living until he is ready to go to work again or go into business.
How much money do you need to have to say that you have enough saved, affording you to quit work? There is no exact figure for this as it depends on your personal lifestyle. Some experts say a fund equivalent to two years' worth of expenses is sufficient. Others would say a fund that will generate interest income in the same amount as your present salary would be the rule.
That would seem like a tall order. Before going any further, ask yourself if quitting work is what you really want to do. Weigh the advantages and disadvantages of working vs. staying home. If you still think that resigning from work is for you, determine the proper timetable for doing it. If you haven't built up enough savings yet, maybe it would be best to postpone that move for a few more years in order for you to increase your savings.
Spend some time analyzing your current financial situation and do a personal balance sheet. Do an "inventory" of your assets and list down their value, from bank deposits and investments to receivables, properties, jewelry and the like. How much are your total assets? Next, write down all your liabilities (credit card debt, mortgage, and other payables) and deduct them from your total assets. You will arrive at your net worth, which may be positive or negative. This figure is how much you are worth right now. Is this amount enough for you at this current stage in your life? If not, maybe you should remain in the workforce for now. But if it is enough, then that is a good sign.
If you are decided on giving up your work next year, here are a few tips on how to make your fund last longer to sustain your lifestyle for many years:
1. Invest your money in investments such as bonds and government securities that may give you a steady regular income higher than that offered by bank deposits. Bear in mind that bonds and government securities are not entirely risk free. Talk to a financial expert at an investment company or your bank to see if bond funds are suited to your risk appetite.
2. Consider living a simpler lifestyle. Some people even sell their homes and move to a smaller one as they move to retirement or semi-retirement. They also move to a place where the cost of living may be lower. Look at your lifestyle and identify things you can let go of
(example: annual trip abroad, eating out weekly, or an extra car) in order to make your fund last longer.
3. Make a budget. This will be your guide to spending to ensure that you don't burn up your fund fast. Aim to spend within your means.
4. Find other sources of income. Staying home doesn't mean not earning at all. Think of an activity that you enjoy doing and see if you can earn income from it. If it is something you like doing, and you can do it at home at leisure, it won't be like work. Examples of such
activities are dog breeding, growing orchids or bonsais, or baking. Another option is to do consultancies which you can do at your own time.
5. Continue saving. As you find work you can do from home, continue saving at least 10 percent of your income, and investing this. Diversify your investments.
6. Let the family in on the whole effort. Explain to your family that you need to live simply so you can continue staying at home with them. Get their cooperation, then as a family, find ways to bond and have recreation without having to spend so much.
The decision to resign from work is a big move that will change your life. Make sure you have thought things over and planned for the future before taking the plunge. We wish you the best.
Source:business.inquirer.net
A: Many people who have been working for a long time are looking forward to when they can ditch their usual routine of braving the traffic to get to work at 8 a.m. each day. Whether you call it burnout or mid-life crisis or just a welcome change - such a move is appealing.
Getting out of the rat race to stay at home or go into business will need a lot of preparation though, and this is why many choose to continue working. Quitting work means the loss of a steady and guaranteed income stream so before taking the big leap, one must ensure that he has enough saved to help him cover his cost of living until he is ready to go to work again or go into business.
How much money do you need to have to say that you have enough saved, affording you to quit work? There is no exact figure for this as it depends on your personal lifestyle. Some experts say a fund equivalent to two years' worth of expenses is sufficient. Others would say a fund that will generate interest income in the same amount as your present salary would be the rule.
That would seem like a tall order. Before going any further, ask yourself if quitting work is what you really want to do. Weigh the advantages and disadvantages of working vs. staying home. If you still think that resigning from work is for you, determine the proper timetable for doing it. If you haven't built up enough savings yet, maybe it would be best to postpone that move for a few more years in order for you to increase your savings.
Spend some time analyzing your current financial situation and do a personal balance sheet. Do an "inventory" of your assets and list down their value, from bank deposits and investments to receivables, properties, jewelry and the like. How much are your total assets? Next, write down all your liabilities (credit card debt, mortgage, and other payables) and deduct them from your total assets. You will arrive at your net worth, which may be positive or negative. This figure is how much you are worth right now. Is this amount enough for you at this current stage in your life? If not, maybe you should remain in the workforce for now. But if it is enough, then that is a good sign.
If you are decided on giving up your work next year, here are a few tips on how to make your fund last longer to sustain your lifestyle for many years:
1. Invest your money in investments such as bonds and government securities that may give you a steady regular income higher than that offered by bank deposits. Bear in mind that bonds and government securities are not entirely risk free. Talk to a financial expert at an investment company or your bank to see if bond funds are suited to your risk appetite.
2. Consider living a simpler lifestyle. Some people even sell their homes and move to a smaller one as they move to retirement or semi-retirement. They also move to a place where the cost of living may be lower. Look at your lifestyle and identify things you can let go of
(example: annual trip abroad, eating out weekly, or an extra car) in order to make your fund last longer.
3. Make a budget. This will be your guide to spending to ensure that you don't burn up your fund fast. Aim to spend within your means.
4. Find other sources of income. Staying home doesn't mean not earning at all. Think of an activity that you enjoy doing and see if you can earn income from it. If it is something you like doing, and you can do it at home at leisure, it won't be like work. Examples of such
activities are dog breeding, growing orchids or bonsais, or baking. Another option is to do consultancies which you can do at your own time.
5. Continue saving. As you find work you can do from home, continue saving at least 10 percent of your income, and investing this. Diversify your investments.
6. Let the family in on the whole effort. Explain to your family that you need to live simply so you can continue staying at home with them. Get their cooperation, then as a family, find ways to bond and have recreation without having to spend so much.
The decision to resign from work is a big move that will change your life. Make sure you have thought things over and planned for the future before taking the plunge. We wish you the best.
Source:business.inquirer.net
Definitely it’s a good idea to invest your money in investments such as bonds and government securities that may give you a fixed regular income higher than that offered by bank deposits.
ReplyDeleteThanks,
Professional Court Reporter