By Vishal P. Rao
One of the main apprehensions of those who consider working from home as an option is the lack
of a regular income. If you are the main earner of the family or contribute significantly to the
living standards, worries like payment of bills, managing with a limited budget, adjusting to a
new lifestyle and other such financial matters are likely to trouble your mind every time you
think of quitting your job and leaving the security of a regular paycheck behind.
However, if you are convinced that
working from home and
starting out on your own is something that you have to do, you should look at finances from the
right perspective. It is essential that you stop worrying about finances in general and get down to
some serious assessment before you make the move. No doubt, there will be adjustment that you and
your family may need to make in the interim period to enable such a decision. But it is important
that you tackle the matter of adequate financial planning to ensure a smooth transition.
Some of the key points that you may need to consider while planning your finances in the
changed scenario are:
- Research your options well – It is a wise man that learns from the experience of others. With the
advancements in connectivity using the Internet and telephony, there are numerous people who have
already made this shift and started working from home. Given your capabilities and specific skills,
assess the various options that are available to you with respect to working from home. Would you
rather work as a freelancer, take on the role of a virtual office assistant or start a completely
new venture? Also determine whether you want to continue being part of an organization and bargain
for a work-from-home option or would you prefer to venture out on your own? There are many corporate
offices today that actually encourage people to work from home to avoid unnecessary investments in
space, infrastructure and management. On the other hand starting something new on your own presents
a different set of challenges.
- Budgets – The first exercise that you need to complete is a complete assessment of the finances
that you require to continue living the way you are. This may include a budgetary exercise where you
assess all your liabilities. At the end of this task, you should have a list of all the items that
you currently make payments for including rent, monthly installments, food, recreation, children’s
education and household goods along with the exact amount of outlay associated with each. Breaking
each broad head will help you in the task that follows.
- Basic minimum monthly requirement - Knock off the various expenditures that are not essential
and reduce the ones that you can to arrive at the basic minimum that is required. This needs to be
done keeping in mind the living standards that you are comfortable with as you embark on your journey
of exploring the potential of your new venture. Remember to reduce current spends on formal clothing
and business suits, gas, taxes and day care. These are the savings that you are likely to gain by
merely changing your workplace. The new figure that you arrive at gives you the basic minimum that
you need per month during the stabilizing phase of your work-from-home venture.
- Short term and long term potential – Once you have worked out what you need, it is time to look
at the other side and assess what you are likely to make in the new scenario. This essentially means
that you do need to know the exact working model that you would like to opt for. If you are looking
to become a freelancer, an assessment of the demand of your skills is a basic necessity. If you are
planning to launch an Internet-based business of your own, you will need to understand the demand for
your product or service and the traffic that you can generate. It is important to keep a short term
view and a long term view in mind while making such an assessment. This is mainly because the long
term potential will help you understand whether it is worth its while to quit the safe confines of
your current job. On the other hand, a phased out short term financial plan will allow you to manage
your budgets better. Make sure that you also look at an optimistic and a pessimistic view of the
earnings while you are in the process.
- Business spends - A sensible assessment of the potential of the new venture should include initial
investments and savings. It is important that you estimate the amount that you will need to pull out of
your savings to start a new venture. Even though home-based businesses do not require large amounts
of money as initial capital, the amounts can be significant given that you are investing your own monies.
Make sure that you do not deplete your savings while planning such a move and keep something for the
rainy day.
- Operating capital – Understand the amount of money that you will require for merely running the
business and keeping it alive in the initial months. Given the potential of your chosen option, it may
require you to plan to fund the initial months with your savings till your operating profits change
from red to green.
Once you have worked these numbers, you should assess the best time to make the move. Even though
you may be absolutely ready to launch yourself, you may need to wait a few more months just to accumulate
the additional funds that you estimated as requirement for the initial phase of your home-based business.
Make full use of this time and put in extra effort to plan your business development, networking and
marketing efforts.
