How Much Money Should You Save Before Quitting Your Job?


The Question: How Much Money Do I Need to Have Saved Before I Quit My Job?

The Answer: Exactly $28,436.26

If you’re scratching your head right now and the thought, That’s Bullshit is running through your mind, good for you! Read on…

What Is A “Nest Egg?”
A special (usually large) sum of money saved for a specific future purpose. In an ideal world, this money should be used only for its originally intended purpose. NestEgg_Small_643321_94903246

  • Also Known As: Reserve fund, Rainy-day fund, Emergency fund
  • Often Used For: Retirement, Education, Vacation, “Big-Ticket” Purchases

For our purposes, we’re talking about the chunk of money you want to have in the bank when you quit your job and launch your own business. This is the money that’ll support you until your new biz gets off the ground and starts bringing in a steady income.

The Scenario: You have a full-time job. You want to quit, and the sooner the better. You have an idea for starting your own business. Maybe it’s brick-and-mortar, maybe it’s online. Whatever the case, it’s tough to start a new career while you’re still chained to the job you want to leave behind. This is the situation Scott and I find ourselves in, and if you’re in the same boat, inevitably this question will come up:

How much money do I need to have saved before I quit my day job?

There are two tons of financial gurus out there who make their living spewing advice all over folks like us. Many of them seem to like to give one-size-fits-all answers such as: You should have six months of living expenses saved before quitting your job and starting your new business. A lot of them like the 6 month thing. What the hell’s so magical about six months? Not much. Other “experts” will tell you to save a year’s worth of expenses before singing Take This Job and Shove It. I really don’t see how 12 months is any more magical than six months.

I’m not a financial expert. I’m not specifically qualified to tell you that if you have $28,436.26 in your savings account, you can proceed to quitting your job and survive it successfully with no financial problems. But the truth is that this figure is just as legitimate as any other one-size-fits-all answer.

What I can do is suggest some things that you should consider when making your own decision about when is the right time to quit. I’ll start with the most important factor, and the reason why I refuse to buy into the one-size-fits-all formula:

You, and Your Situation, are Unique.

Are you planning to start a business selling a product or service for which there is high demand? Or have you pinned your hopes of entrepreneurial success on the sales of your wedding gowns for poodles? Maybe you’ve worked in management for 15 years, have a Masters Degree in Marketing, and want to pursue internet sales and consulting. On the other hand, maybe you’ve been a greeter at Wal-Mart for 10 years, have no business experience, and you’re looking at more of a “learning curve” to get your business off the ground. Especially if you’re selling wedding gowns for poodles. You get the point. There are a lot of variables that will determine how long it will take you to get your new business bringing in enough money to equal – or surpass – the old ball & chain job you’re leaving behind. The longer it takes, the more of a nest egg you’re likely to need. The trick, then, is to take an honest look at your own situation and determine – to the best of your ability:

  • How much money you’ll need to survive the period in-between quitting your current job and making enough money to support yourself with your new gig.
  • How long you will likely need to survive off your nest egg while launching your new business.

To do this, you’ll need to take into account yourself and your business idea. Read on for some important questions that will help guide you towards figuring out how big your nest egg should be.

1. What will your monthly budget look like?

Make your future budget. What recurring expenses will you have once you quit your job? Account for everything: Mortgage, credit card bills, utilities, car payment, alimony, hush-money. You get the idea. Don’t forget the monthly expenses for your new business!

Also, keep in mind that some of your current expenses will change as a result of quitting your day job. If you’re planning to work from home you may spend less on gas or you may be able to fire the baby-sitter. If you have insurance through your employer, you may want to buy your own policy when you quit. If so, find out how much it’ll cost you. When you finish making your budget, you’ll have a general* idea of the minimum* amount of money you’ll need, per month, to survive after you quit your job

(*You will underestimate some things, and there will be expenses you didn’t anticipate. But your projected budget will get you in the ball-park if you’re thorough).


I know, I know. Making a budget is ‘bout as much fun as a root canal. But, it IS ABSOLUTELY NECESSARY. DO THIS NOW. Go ahead. I’ll wait…

Done? Awesome. Now that you have a general idea of what your living expenses will be, you should also consider whether you plan to work a part-time gig while launching your new business, or whether your nest egg will be your only guaranteed source of funds.

If your estimated future budget made you lose consciousness, grab a paper bag, breathe deeply, and read on…

2. Do you have any current expenses you could reduce and/or eliminate in order to reduce your future need?

The trick here is to be honest with yourself about what you’re willing to sacrifice – temporarily – to reduce your living expenses. If you’re paying for 710 premium cable TV channels, could you (would you be willing to) reduce your need and survive on only 300 channels for a while? Are you willing to cut your own grass and stop paying someone else to do it? Take a look at your current expenses and see what you’re paying for that could be reduced or eliminated. Then, ask yourself if you’d be willing and able to do without that expense temporarily. The trade-off: If you reduce your living expenses, you also reduce the size of the nest egg you’ll need. Now’s a good time to compare auto insurance rates and find a cheaper cell phone service.


3. How much will it cost to launch your new business?

Will you need to pay rent on a building? Hire an accountant? Purchase inventory? Think hard and try to account for even the “minor” start-up expenses. They add up. Will you need an additional phone line? What about advertising?

4. Are you ready to launch your new business?

Do as much as you can to prepare for launching your new biz BEFORE quitting your current job. You don’t want to waste your first month as a Quitter setting up your home office. If you know you want to learn how to use QuickBooks so you can do your own accounting, learn now – not after you quit your job. When you quit your job, be ready to “hit the ground running.”


5. Do you have a back-up plan?

Business-types call it a “contingency plan.” If your business plan (you do have one, right?) doesn’t work out like you expected, what are you going to do about it? How quickly you can implement your back-up plan and bail yourself out of trouble will affect how big of a nest egg you need. If you see things turning South, have a contingency plan that you can put into action quickly and start getting some cash coming in – at least until you’re over the hump. For a lot of people, a contingency plan may involve re-entering the rat-race (a.k.a. traditional workforce) on a temporary and/or part-time basis. If that’s your plan, consider the next question carefully.

6. Can you get another job quickly, if needed?

Pardon me while I get all pessimistic for a minute. What if your business is dead in the water and you’re broke after 6 months? If you’ve been a doctor for 15 years, you should have no problem re-entering the workforce if your start-up doesn’t exactly start up. However, what if you’ve always worked in construction and all the construction companies in your town are going out of business because the economy is in the crapper and nobody’s building new houses right now? Assess your skills, work history, education, and resume. If it would take you a few months to find a “regular” job, you may want to take that into consideration when determining the size of your nest egg.

7. What will you be tempted to spend your “nest egg” money on – other than what it’s there for?

Are you disciplined enough to use your reserve funds only to pay your monthly expenses? If you answered “yes,” you’re either a rare breed, or the more common breed, humanis indenialum. Ok, complete this sentence: If I had an extra $2,000 – I’d just have to spend it on _____________. If you’re saving a nest egg now, chances are when you quit your job, you’ll probably have a bigger chunk of “extra” money than you’ve ever had before. Be honest with yourself. If you know you won’t be able to resist the bus-sized plasma TV, plan for it ahead of time – or figure out how to get over it. If you know you’ll give in to temptation, you’ll need a bigger nest egg to support your impulse-buying habit.

8. How will your life (and finances) change in the next year?

Is your car on its death bed? Is your roof leaking? Are you planning to start a family? Think of what big expenses might be coming your way and take that into account when planning the size of your nest egg. Better yet, if you know you need another car, it may be better to get it before you quit your job – especially if you’ll need a loan. Financing will be more challenging if you don’t have a steady income to show on your loan application.

9. Have you taken a vacation lately?

Ok, so you have a nest egg and you’ve quit your job with plans to work from home. You’ve entered the land of perpetual Saturdays. If you’re one of those folks that has gotten truly burned out and you’ve had your ass kicked by the 40-hour work-week, you may be tempted to look at this as a vacation. Will you be tempted to dip into your nest egg to fund a cruise to the Bahamas? If so, be honest with yourself about it. Plan for it, save for it, and enjoy the trip! Otherwise, get in your final paid vacation through your employer and enjoy the hell outta’ that too. I personally like the idea of taking a (planned & budgeted) vacation between quitting and starting a new business. Clear your mind, get refreshed and re-focused on the task ahead so you’re ready to pour your heart and soul into your new venture!

10. This one’s all yours.

Think about your personal habits, strengths, and weaknesses. Think about your unique situation and business idea. What else would you add to this list?

Comment below and tell us your #10

A Few Other Tips

  • If you have any medical problems and you’ve been avoiding addressing them, now’s the time. You don’t want to get slapped with a huge unexpected medical bill a week after quitting your job. Get it checked out, if it’s something that needs treatment, do it while you have insurance through your current employer.
  • Keep a list of things you need to get done in preparation for your launch. Check off as much of this list as possible before you quit.
  • If you’re a chronic worry-wart, plan for your worst-case scenario (it’ll reduce the stress of quitting and the fear of the unknown). What’s the worst that could happen – and what would you do about it if it did happen?

Thanks to reader “CreativeHedgehog” for

suggesting this topic through Skribit



7 thoughts on “How Much Money Should You Save Before Quitting Your Job?”

  1. My suggestion – if you have the opportunity NOT to quit your job before starting a new venture do that.

    If your venture is online, then it is quite feasible to do this and quit only after you new venture stats to earn something like a livable income.

  2. Matt,
    I agree with your suggestion. That’s how we’re trying to do it. It’s tough sometimes to find the time to develop your “new income” while you still have a 40-hour/week obligation to your job. But, in the long run I think it’s the safest way to go.

  3. Ah but here’s the issue, often working for yourself means doing more than 40 hours per week anyway. So if putting in an additional 20 hours per week is off putting, then maybe concept of work from home is something to be reconsidered.

    Working from home often means working evenings and weekends, though often with flexibility of hours which possibly is one of the main appeals!

    1. Well, of course working 60 hours/week is off-putting! I don’t think that’s anyone’s ideal lifestyle. But…we’re willing to put in the extra time NOW in order to be in a better situation in the end…

      I don’t think there’s necessarily one “right way” to do the work-from-home thing. For example, some people don’t mind putting in a lot of hours if it means they can stay at home and work when they want to. Different people have different “ideal” situations. It depends on what’s important to you and what type of work you decide to pursue.

      For us though, we want the freedom of NOT having to work 40 hours/week, and the freedom of being able to “set our own hours.” It all depends on what you want, and having the conviction and persistence to make it happen.

  4. I agree 100% – just alerting to some of the myths of work-at-home. I know some technically (coding etc to get 10s thousands of products up on ’000s pages over dozens of sites) competent people in affiliate marketing who work 5 hours per day, others equally competent work 12+ – each earn about the same.

    Me, I do about 8 hrs per day, with a break of 4-5 hours between ‘shifts’ (generally related to providing customer service at times when customers are online in various countries).

  5. Great blog!

    I think I’m in a much different situation than many Americans. I’m 40 years old, single, have no kids, don’t own a home, but work a salaried 40-hour a week very stressful computer tech job, but actually tend to be at the office 60 hours a week. The workload is awful and extremely stressful. I don’t enjoy getting up and going to work any morning, and dislike doing some of it so much that I prefer putting it off until that work cannot be put off any longer (and instead work on other needed tasks I’m more comfortable with in the interim). As a result, the tasks I’m least comfortable never get performed to the best quality. My lack of good work efficiency has definitely affected my perception at the office, which shows in my annual performance reviews.

    I really wish my employer would lay me off so I could start over. But here’s the kicker: I’ve been such a frugal penny-pincher all my life, and live a very humble, meager lifestyle, that I don’t have just months of an emergency savings fund saved up, but rather years…more than 5 years not including retirement funds. Still this is nowhere near enough where I could just outright quit my job and retire today.

    Some would simply say “why don’t you just look for another job and get out of there?” Not that easy for three reasons: (1) I don’t have time to seek another job while I’m working at my present job (60 hours a week); I’d have all the time in the world to find another job if I quit my current job (and not worry about whether I could get the time off from my current job to interview for the job at a prospect employer). (2) There’s not many jobs out there right now; few companies are hiring with the unemployment rate above 10%. (3) Why would I want to find a job doing the same thing I’m currently doing, since I dislike it so much (though I feel trapped staying with the same line of work due to my narrow experience and skillset).

    My large financial cushion, plus the extreme amount of dislike I have for my job (well my life in general), has made me want to quit the job more and more with nothing to fall back on.

    But probably the biggest problem with this is “where would I go from there?”. Even after being out of college for almost 20 years, I (still) don’t really know what it is I want to do as a fulltime career (and I highly doubt my current one is it), specifically something I would enjoy doing and that would allow me to make a living. I do have a college degree (B.S. in Electrical Engineering) that I got nearly 20 years ago, but going back to school seems nearly impossible due to the high cost of education these days. I’ve also considered seeking out a career counselor and taking one of those career tests that can pick a set of careers best suited based on my personality.

    I realize I couldn’t collect unemployment insurance if I quit my job, and also have to either live with a high cost of health insurance, or live without health insurance and take a risk with my health.

    Because I’m so so miserable at my current job and am getting older (just turned 40), I honestly feel trapped and don’t know what to do.

    1. Steve,

      I appreciate your sincere desire to improve your situation. There are SO many people in your shoes and you just summarized how they all feel. As a matter of fact, Tammy and I reached the end of our rope and decided to change our lives. This blog is a chronicle of what we are doing. But, in many ways, we started off without a clue as to what, exactly, we wanted to do. But there are ways to discover this. Not to overstate the value of this website, but coming here was a great place to start. We are your allies and we want for you, and for all of us struggling to improve our lives, to regain control of our own lives. Why should your life be dictated by the status quo? Why should you listen to so many other people who tell you what is right for you…what you should do with your live? These people have no clue and almost all of them are merely regurgitating what they’ve heard, not what they know. After all, how in the world can they even come close to knowing what is best for you?

      I’m so glad you like our blog and I hope you find some articles here that will get you thinking in new ways. Check out my Motivation series if you want to open your mind to some great ideas. If you’re willing, I would love to discuss more of this with you. Please contact me via email through our contact page or via scott [dot] quitters [at] gmail [dot] com. Perhaps we can bounce around some ideas which may help you connect with something meaningful that would like to pursue in your life. If you’re not inspired by what you are doing with your life, it’s time to shake things up! I suspect that your life is about to change for the better! ;-)

      With Gratitude,

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>