Ask HN: How much savings did you have before quitting your industry job? - null_ptr
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dutchbrit
If you plan on quitting your job, don't just follow what people comment here.
The actual amount you need should be calculated yourself, based on your plans.

1) How much money do you need to get round per month.

2) Add a chunk ontop of that for unforseen expenses, broken fridge for
example...

3) How long do you estimate you'll be working on your project?

4) Add a large percentage to that estimate for unexpected issues

5) Will you need to make investments? Hardware? Designers? Calculate these
figures.

6) Add a month (or 2) to the above, if your project fails to start making
revenue, you'll need to find yourself a job - well, depending on how easy it
is for you to find a good job...

It's an amount you need to calculate. Don't underestimate.

Then you're ready to roll.

~~~
jsvaughan
You should also factor in time to get paid. If in your new venture you are
going to be invoicing people directly then you should allow at least a couple
of months to be paid.

i.e. you say 30 day payment terms on your invoice, but nobody will pay until
that 30 days has elapsed, some people will pay you in the 4 weeks after that,
and sometimes even with aggressively chasing you will have invoices which are
2 months overdue (i.e. no money for 3 months after they received the invoice)

~~~
dutchbrit
Also - good one!

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patio11
On the order of $4,000, though in my circumstances it was less risky than that
number would suggest, since I already had covered-the-day-job cash flow from
Bingo Card Creator and strong odds of successfully filling a consulting
pipeline by that point. (I'm not counting my retirement account, which was in
the low five figures, since I wasn't planning on touching it for any reason
short of "I'm dying in the snow.")

~~~
TaffeyLewis
"I'm dying in the snow" hahaha.... Good enough reason, had to comment because
it made me laugh right out loud..

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robertnealan
I only had about $2000 (half a month's paycheck at the time), but the change
in work was prompted by a multi-month consulting gig that was paying in the
low five figures over the course of a few months.

My advice is to start looking for work before you leave your industry job -
think if it as though you're doing lean testing on your product, except your
product is yourself. If you can't find clients while at your day job, then
iterate on yourself (website, services offered, your client pitch, how you're
looking for clients, etc) and try again.

~~~
bwangsta
I have a similar story. I only saved up about $2000 too, but I also had a
1-month consulting gig that would pay me about 5 months' salary. That was
enough to spur me to quit my job and start working on my own. I earned over a
year's salary in the past 3 months since I quit and haven't looked back since.

~~~
bwangsta
Also, I'm 35 years old, so not just some kid who could afford to take risks.
Just was never able to save up $ on a salary, went through a few periods of
unemployment, and a few of my other startups failed. I'm finally on course to
make some real dough and it never would've happened if I didn't quit.

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doppenhe
1 year of expenses including rent,healthcare, food ,etc.

When doing financial planning you should always try to save up to 6 months of
all expenses. This is hard to achieve but the recommended number even if you
are staying at your industry job. You never know what can happen.

~~~
Spooky23
Seriously, how do you do this?

My family makes a good income, own a modest home, drive 10 year old cars, have
$0 debt ex-mortgage and don't do exotic trips. We put 20% away for retirement.

Our baseline cost to live including mortgage, property tax, food & minimal
extras is probably around $45k. Our area has a tight rental market, so owning
the house is a net money saver.

Other than cannibalizing retirement, building up that much is tough.

~~~
shazow
When I scored my first job out of school, I moved out into a tiny apartment in
downtown Toronto—walking distance from the office. I managed to save about
half of my after-tax income for a year and a half which came out to $26k.

No car, no family to support, no travel, no expensive purchases (I remember
deliberating for weeks about buying an iPod Nano). Doubt I could have done it
with a family to support and multiple cars.

I did have immediately family as a safety net but I covered my own expenses
for whatever I needed after moving out, with the exception of a few meals here
and there.

~~~
jdc0589
My situation was extremely similar, though I had a car and half my salary for
the year came out to more like 20k. Two years and a lot of raises later I am
maintaining the same lifestyle, still have a roommate + a fairly cheap
apartment, and putting away around 70% of my salary each month.

Not having any dependents helps...a lot.

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callmeed
None.

I don't know if it matters but this was in 2000 (and not in SV/SF). I was
doing IT/help desk for a UPS call center with a few servers and 75
workstations (on a token ring network!).

We had been doing educational software in our spare time. We landed a couple
decent contracts and I decided to quit and go for it (I was also a senior at
Cal Poly and quit). At the time, my rent was $400/month and I wasn't married.
We found an office for $250/month.

Of course 18 months later things got real tight. After the .com crash, a lot
of california colleges got their budgets cut. But we survived long enough to
sell the company at the same time a new one started and took off.

I'm sure there's lots of sound advice here and my story shouldn't be a model.

I haven't had a real job since and I'm still a senior ;)

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onion2k
About $100k. It lasted me 4 years. Frankly, I sort of wish I'd had a lot less.
I never felt any sort of urgency like "This _must_ succeed."

No regrets though. The last 4 years have been a lot of fun. :)

~~~
AznHisoka
Did you spend all 4 years on UsableHQ? And why do you think it failed?

~~~
onion2k
About 2 years were spent on Usable, and the other 2 on ... err ... a litany of
failed ideas that I didn't much enough effort into. But they were terrible
ideas, so nevermind. :)

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alanbyrne
I had 3 months worth of pay in savings. My plan was to start looking for work
if there wasn't enough income to keep me going after month 2.

1 year later and still going strong!

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PaulHoule
$10k liquid + $15k in withheld taxes the government owes me.

At least 5-8x that in an HSA, 401k, SEP, IRAs, Roth IRAs and tax-advantaged
government bonds paying 7.5% that I bought a few months after I cashed out of
the Janus fund in Dec 1999. (My broker fired me for that)

I'm going to hold on to those bonds as long as I can, and I'd much rather
borrow against the equity of the "home" I own at a lower rate. (I bought the
home in cash, so this is my "first" mortgage -- I opened the account when I
wanted some capital to take a chance at buying an adjoining property at a tax
auction.)

One of the first things I did when I quit was write a check from the heloc to
the HSA so I wouldn't have to think about making contributions for it.

It's a little more complex than that because I have two houses on one large
lot and my wife's riding academy and the rental income creates a financial
situation that's so sweet it's almost a scam. I think last year I got $16k of
rent, experienced a positive cashflow of around $14k from it, but the IRS says
we made $4.5k of income because of depreciation on our property.

(I have no idea why anybody buys a single family house; as much as muggles
make a big deal of the mortgage interest deduction, owning a duplex means you
can write off half the principal plus you get a cash flow to help w/ the
mortgage and property taxes. Maybe you even get a cool neighbor.)

One key to making this work is that I can get a high deductible health
insurance plan through COBRA for $500 a month and that will tide me through
until Obamacare comes unless the Republicans defund it. That's important
because there really isn't any such thing as individual health insurance in
NY. (I'd better write that letter to my Republican congressman before I
forget.)

Anyhow, it isn't all roses. I pay $4k a year in taxes for a "persistently
dangerous" school that my son goes to where probably 1/2 of the parents w/
college educations don't send their kids to because they homeschool. They
haven't had a principal last more than two years so long as I know.

The internet sucks out here too. Github works OK, but it took 30 seconds to
create a trouble ticket with the off-brand project management software at my
last job, which was one of the reasons I quit. Netflix and Amazon instant
video work, but I can't really watch Youtube. I used to use Flickr a lot, but
with the latest update it is so slow I can't even use my own photographs when
I make a presentation because it takes 1 minute+ to load.

~~~
jahbreeze
this is the only realistic post i saw on here. the people who say they saved
2k before starting their venture are probably 18-22 years old and crashing at
their parents' pad.

if you're a grown up, i don't see anyway you can start a venture without a
year of savings built up or some sort of income (investments, part-time work,
etc). let's say you give your venture 6 months and you fail. you'll need a few
months to get yourself a paying job again before you're evicted/foreclosed.

~~~
PaulHoule
If you're in that situation (can crash at your parent's pad) you should take
advantage of it.

Remember now it's not just about "not getting evicted", it is also useful to
have working capital.

I have a project I'm working on that will probably cost $600-$800 of
computation in a Hadoop cluster in Amzazon AWS assuming I don't screw it up
and have to do it twice.

In my situation I can "just do it".

To make an analogy with Poker, you do not want to be short stacked.

I know many "entrepreneurs" have an idea which they could move forward with
personal investments in the $50-$5000 range. Instead of making a cool demo or
any kind of prototype, they go talking to angel investors and they wonder why
they get nowhere.

Somehow though, they manage to find $150 to give to Time Warner and $150 to
give to Verizon every month.

For a while, for instance, I was talking w/ people in NJ, CT (imagine a donut
centered around NYC) about applications of text analysis in financial
services. Lots of talking to investors, but no demo.

I spent about 40 hours and about $12 (domain name) on a demo over the course
of six months, which failed. It's material for a blog post. I can say I didn't
know anything at all about the problem when I started and now I know
something.

Also you really gotta pay attention to taxes when you're self employed. I lost
about a year because I owed the IRS and NY about $15k of estimated tax I
didn't pay, so I took a job I shouldn't have taken. I can be philosophical
about it because I met one of my competitors at a conference and he was
bouncing off the walls because he'd spent a year fighting with the technology
transfer (prevention) office at his uni.

------
jsonmez
Wrong question. How much passive income from a side business do you need
before quitting your industry job?

~~~
AznHisoka
I made around $60K/month for a good 2 years from a side project, while still
keeping my day job.

Nowadays I make close to $8k/month passive income, and I regret not quitting
back then. I could've easily made double the amount if I had focused strictly
on that.

~~~
wallawe
What's your side project if you don't mind me asking?

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gw
I quit my job two months ago with close to $10k saved up. It's too early to
claim success, though. I think location is really relevant. In Pittsburgh,
rent is quite cheap, but I'm sure the situation is different elsewhere in the
country.

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grimtrigger
Planning on quitting with 6-9 months of burn (assuming I don't make another
dollar). But I'm also planning on putting a startup before
freelance/consulting so it might be a while before I start breaking even.

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cprncus
I wish I knew more about these stories. How __OLD __were you? That 's key to
me. It's one thing to quit your job when you are 23; another entirely if you
are 51. I'm assuming the average age of the commenters below is 28.

There should be a formula that includes terms for age, likely earning
potential on re-entry to job market, savings, debt, assets (like a paid-off
house), % completion of the start-up project you're leaving for, monthly
influx from startup project when you quit, etc., etc. The formula would pop
out a single number, the Gutsy Factor.

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bluedino
Number is pretty irrelevant if you're not relating it to expenses. Living with
4 roommates or something for $200 a month is going to take a lot less cushion
than if you have a family of 3 and a mortgage.

~~~
sejje
Numbers can be described, as they are throughout the thread, in multiples of
monthly expenses or other types of scales.

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eliasdelatorre
I had about $11,000 USD after working for 20 months at IBM, lasted for about
year and a half. Best decision ever. =)

~~~
basicallydan
What did you do after that?

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qeorge
About $20k, in a mutual fund. Didn't plan to spend it all but I did, quickly.
I was working at a grocery store though, so little "risk". :)

As others have said - you need to learn to live cheaply. Savings dwindles
amazingly fast when you have no income.

Personally, I dropped my cell phone & cable TV, and got rid of my car. It took
about 3 years to get back to "normal" \- would never have made it without
slashing expenses.

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wyattsthrowaway
$20k in the bank

$500/mo recurring

negotiating a $15k consulting project

several other potential projects in early talks

Remember that runway = cash/burn_rate. Lowering burn rate was a key enabler: I
was able to find a rent-free living situation for a few months and that put me
over the edge to quit. I also have a nice safety valve in that at the end of
the runway, I don't crash and burn, I walk right back into an industry job __.

Because my burn rate is much lower than my former 6.5k/mo industry pay rate, I
expect this to go much further than the 3 months pay I have in savings. That
said, I'm being conservative and would only commit myself to 3mo terms at the
longest for office/rent.

I don't claim to know anything about the sufficiency here, it was just my best
guess. Comments welcome :-)

* There are no guarantees, but I received 3 offers @80k+ in 1mo of searching, so I like my odds. On a related note, always prefer data like this to a gut feel of your employability.

(throwaway -- don't need prospective clients seeing my financials)

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vitd
I had either 3 or 6 months of salary saved up - whatever it is that experts
always say. And I'll tell you this, I was super freaked out about money the
entire time. I felt like I was just about to go broke almost every step of the
way until I landed my first good client. (That took 4-5 months, if I recall
correctly.) And I'm a pretty mellow person able to deal with some amount of
risk.

If I had to do it again, I'd make sure I had at least one year's salary.
Several people have asked, "How is that possible to do?" I wouldn't have been
able to do it at the time. Well, all I can say is that it gets much easier as
you get older and get better jobs with stock options that are worth something,
and if you've been saving for a decade or more. If you're just starting out,
it's a lot harder if you aren't incredibly lucky. (Although you also have
fewer repercussions if you mess it up.)

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esw
First time: about two months salary. I'd just been laid off for the second
time in two years, and rather than find another job in the same industry, I
decided to try doing my own thing for a while. It was a great learning
experience and I eventually came out ahead, but I basically lived month to
month for several years.

Second time: about a year's salary in savings, and I had enough revenue to
live on by the time I quit my day job. I was probably overly cautious, but my
wife was pregnant and I didn't want to blow it.

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lumens
About $26k, though a good chunk of it was commissions that were still incoming
(with no guarantee of receipt).

That said, I think there is a similar concept to the Minimum Viable Product
that I'll call "Minimum Acceptable Savings". If you're going out on your own,
your job is to Figure it Out. You need enough to be able to start figuring it
out, but any more than that and you're stalling the move and ultimately
falling behind.

Don't be scared to sell your couch, y'know?

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benmorris
I had almost a year worth of normal income stashed away. Plus my wife's income
was also coming in. To be honest that was a really conservative move and not
really required. I made a pretty comfortable amount plus had some pretty large
side web jobs I helped build up my savings. It was a lot of after hours
working though.

Pretty ironic to be talking about this today, because this is a year to the
day I left my day job. I still can say it was the best thing I ever did.

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6thSigma
I had about my annual salary minus taxes in savings. I also had 2 or 3
contracting gigs lined up.

In addition to all of that, I had zero debt.

~~~
hashtree
Same boat here.

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splendidfailure
I had about $9k and the expectation that I would do some consulting on the
side to help out with expenses. I don't think I'd do the same thing again,
because consulting ate up a lot of time that I could've been iterating on my
project and that became a large source of frustration for me over time.

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danmaz74
I quit my day job this September, with €14,000 ($19,000) in savings. But I
already have cybranding.com making some money - and very good reasons to think
things will move fast now. Otherwise, having a family to support, I would
never have done so before raising some money!

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yildirim
I was making around $3000 before leaving my job (it's very good money for
Turkey) and I had $3000 when I left my company. It's been almost 3 months now
and I have $1000 more. My project is ready to sell. And we will start selling
next week. I hope I can survive.

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TaffeyLewis
In my case, I had something like 2,500 saved up before quitting my
construction industry related job, moving to Mexico and giving myself 2 months
to become a freelance writer. Worked out after all, though it was nerve
wracking

~~~
lgieron
Sounds like a material for a story in itself ;)

~~~
TaffeyLewis
Hah.. not too much, it was not as dramatic as seemed with my initial post.
Mainly full of lots of stress and working fast to keep from starving... and to
learn the language quickly.

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br0ke
I think it's better to count in time rather than dollars... I just quit last
week with approx 14mo, but I'm just starting so who knows if it was a good
move :)

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watmough
I budgeted about $30k for 3 years off (my wife continued to work), made
between $10k and $20k/year from my FemCal app, then went back to work when the
$30k ran out.

No regrets.

------
JoeAltmaier
I never had an industry job. Except when my startups got bought. Straight to a
startup out of college, never looked back.

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tr0ss
$15,000 in savings $1,600 a month in costs Just quit my job so don't know
exactly how long it will last

~~~
harpb
Wanted to wish ur success in ur adventure - go slay some dragons.

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anandabits
2-3 years worth of living expenses. Should give me plenty of runway to get my
business off the ground...

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benhebert
$10,000 savings

I could survive on $2,000 per month.

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jheriko
savings?

i should make some of those before i quit my industry job... although i was
hoping i would get up and running on the side, and not needing any other
peoples money...

i might quit after something takes off enough to need full time attention. :)

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moubarak
my balance was negative 2k. i had to pay a monthly payment to cover that loan
and i still quit my industry job because i realised that time was money too.
the pressure helped me find ways to survive and i did.

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devin
Nothing. I was forced to figure it out quickly or go back to school.

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notwedtm
$0. I was stupid, but through sheer dumb luck I made it.

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segmondy
Why do you want to quit your industry job?

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benched
$95K. It wasn't enough. My time building my product was cut short by
unexpected health problems, which not only accelerated my cash burn, but also
made it more difficult than usual to find my next job when I needed it. I
landed hard, on my ass, though I eventually got to my feet again.

