Earned Income

Earned Income is your hourly pay or salary from a job. Business income is where you receive profits or a share of the profits from a company that you are owner or part-owner of. 

I'm assuming MOST people do have some kind of job. And if you're here, then you're either looking to supplement your current income, or make a life change to see what other ways there are to make money besides a "9 to 5" job. The rest of my site covers all the various streams of income that I believe there are, but this particular page will be devoted to what you would need to do to smoothly transition from a hour/salary job to a home-based business or business of your own ...

Want to quit your 9-5 job?

Woah, woah, woah! Not so fast.  There could be a multitude of reasons someone would want to quit their job and just start an online business or sell products on Etsy or Ebay. And sure, there ARE ways to do that and be successful at it (and YES, I'll cover how to do that in my website), but you MAAAY want to make sure you have a financial cushion FIRST, before you 'throw in the towel'!

There are a few "steps" you might want to consider before quitting your job and like I like to say on my site, "Make your Money Work FOR you!"

• FINANCIAL CUSHION - There's some debate how much of a financial cushion you would need. I've heard 6 months to 1 year. In my opinion, you should shoot for 1 year of expenses saved up. I know that's harder, but the reason I say that is that if you quit a job and have ZERO income stream, or just small commissions or sales trickling in, then that's not going to pay your bills. You'll be operating at a loss for MONTHS. And before you know it, 6 months blew by. Starting to panic yet? 

• Here's how you do it. Track your expenses for 1-2 months. You might keep a log or a spreadsheet. You could also check your bank statements for previous months. Include paycheck income and expenses. Create an average expense for groceries and discretionary. 

• Then multiply that by 6 months, or for what I'm suggesting, 12 months, to get how much you want to save up. If you find that number STAGGERING, then, I'm sorry to say that you are definitely not ready to quit your day job. You really should have some financial stability to do well at home-based business. The UNFORTUNATE TRUTH is that may people quit their jobs for the opposite reason - they have just had it with their normal job that they want to try their own thing! I get it. 

• But, I'm trying to tell you the SMART WAY to do it. In my opinion, you could start your home based business NOW, and still plug away at your day job and use your income to save up, to pay down debts, and to even start your business while you have a normal job. 

• PAY DOWN CREDIT CARD DEBT: You also should consider paying down credit card debt. Once you quit your job, you'll want to minimize expenses - things that will gnaw down your previous cash reserve. I know that's hard to do, but you need to do it. Why?  You are paying interest on your balances. It's like taking $20 out of an ATM and immediately turning around and throwing it in the garbage. It's an unnecessary expense. 

• There's not really any wrong way to do it. Some say pay down the largest balance. Some say pay down the credit card with the highest interest rate. While others say pay down the smallest balance. 

• Logically, it makes sense to pay down the largest interest card because that's where the most money is being lost. BUT, I believe there other 2 SMART WAYS to do it:

• FIRST: Probably the best way is DEBT CONSOLIDATION. This is where you apply for a loan that would pay off all credit cards, but the loan would have a LOWER rate than most of your credit cards. So the "pain" every month is less. A lot of times the debt consolidation company will arrange to pay of your cards FOR YOU. So, all you have to do, is just start making single payments to the debt consolidation website. 

• The best site I've found so far is Upstart.com with funding as soon as 1 business day! They have a "soft pull" technology where you can check your new loan interest rate online right away without affecting your credit score. 

• I have a whole other page talking about Upstart so check it out if you'd like to know more about PAYING OFF DEBT THE SMART WAY!   

• SECOND: There are some of us that do not want to apply for another financing product. So, what you should do, is PAY DOWN THE SMALLEST BALANCE FIRST. There are a few "gurus" like Suze Orman, Rich Dad's Robert Kyosaki and Jim Cramer that suggest that it might be better to do it that way ...

• Here's why. Psychologically, a lot of us just continue to pay the MINIMUM payment on credit cards because paying off the balance is too painful - impossible because the balance is too big. This perpetuates and prolongs the pain and leads us to hopelessness and desperation as the interest gets bigger and bigger by the month! 

• So, by paying down the smallest balance first, you get a VICTORY very fast!  It's fun to look at your outstanding balance and have it read $2. Then whatever you paid on that card, you then apply to the next smallest balance on top of the minimum payment. But, one more thing on paying down cards: DON'T PAY THE BALANCE DOWN TO ZERO. 

• This is because Credit Monitoring wants to see that you are using credit (to build credit history) and are responsible enough to keep the balance low and not go crazy on credit. 

• So, when you go to MYFICO.COM they have a number of easy-to-use helpful tools to evaluate your credit accounts, payoff simulations, and credit history reports. They can even reveal errors in your account history that you can dispute. On their website, I found a few hidden statistics: 

• FICO "High Achievers" use less than 6% of their available credit. This means - DON'T pay your balances to zero. Instead, keep a low balance of less than 6% of your total credit card limit. This way, it will appear you are able to use credit (by having a balance) and not go crazy with it.

• FICO "High Achievers" have a credit score of 785+.

• Here are what influence your credit score and what % of the score it impacts:
• Payment History = 35%
• Amount of Debt = 30%
• Length of Credit History = 15%
• Credit Mix = 10%
• Amount of New Credit = 10%

So, in summary, I would suggest - DON'T quit your "day job" (or night job) just yet. Use your time and income now to pay down unnecessary debts and accumulate some kind of financial cushion, so that when you do move on to something else, you'll have some peace of mind that you will be ok when your business is just getting started. 

In fact, I think that once you start reducing your debt, and maybe even kick off your home-based business WHILE you're still working, you may find that you are happier because you know you have already started the path to another new lifestyle!

Content on entire website is of opinion only and for EDUCATIONAL PURPOSES ONLY and not intended as financial advice or trading advice. We/I are not financial advisors. Please consult your financial advisor for advice. All investment strategies and investments involve risk of 100% loss. Nothing contained in this website should be construed as investment advice. Any reference to an investment's past or potential performance is not, and should not be construed as, a recommendation or as a guarantee of any specific outcome or profit. 

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