When I quit my job I was already making the exact amount I made from my business and the only reason I didn’t end up failing was because I was living with my mom, so my expenses went down when I quit my job.
But that’s not the case for most of us, we no longer live with our parents and if you do, then take full advantage. But in this video, I’ll tell you about the 3x rule before you quit your job, the simple idea is to have 3x times your income coming in before you quit.
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Basic idea: the 3x rule basically tell you, that before you quit your job, your business or passive income strategy your’ll make you 3 times what you make today or atleast the figure shown below.
1X for Survival
I have a budget called the baseline budget.
And The idea is very simple
How much money do you need to survive)
Here are the main 4 expenses:
Shelter
Utilities
Groceries
Trasnportation
The truth:
Everything outside of this is a want, you don’t really need it
So the idea is right now down the figures and that’s how you know what your baseline budget is
Eventually you can word on increase your income to have more money for more stuff ( but this budget helps you quit your job faster )
Because you need less money
For example: if you make 4k
But you can live on 2k
Then that’s awesome
That leave you with extra money
1X for Taxes
Taxes aren’t really going to be 1x per say but if you can make 1x and then quit
That literally means most of the money that come in, is going to be fully yours
You don’t want to get your goal and then realize that most of the money is going toward taxes
For example: if you make 4k net now
Then your passive income idea makes you 4k
Then you gotta take out most likely 33% of that for taxes
So I don’t think you have to make 1x of your income to cover it
But I do think it’s a good idea to cover at least 30% of taxes
1X for Investing
One of the biggest mistakes people make
Is forcing their business to use all the cash flow just to take care of them
That not a good idea
Why?
If youre business makes 2k and you eat the 2k
Then you don’t have any extra money to be able to put to work and allow to compound
That’s why you want to have money left over to invest
My idea is this :
You don’t need 1x but you do need atleast 20% extra for investing
This way you can perpetually keep investing no matter what
Lets run the numbers
Right now I make $4,000 from my job and I want to quit
How much money do I need to make before I quit my job
The answer is this
First: Baseline Figure
For me its $2,000 a month ( so about .5X)
Taxes may be about 30% or so
I also want to continue to invest so I need 20%
Option 1 is this:
Have at least 6-12 months’ worth of expenses in case things go left
Option 2 is:
Have a surplus of at least 50% of what you need per month
So that’s an additional $1,500
This way, if the income goes down you fall to where you can still run everythig
And use the extra income to build a reserve
Obviously this is not a quit your job tomorrow plan
But it is a quit your job and not have to worry about going back plan
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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.
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