Living Off Your Income

I was just reading a question by someone who was working at a job and also running their own business, they wanted to know when to quit their job and start living off the income from their business.

There is no correct answer to this question, because everyone has a different tolerance for risk.  

To measure your risk tolerance just ask yourself how much money in the bank do you need to feel comfortable?

I think of it in terms of paying your monthly bills.

Some people feel very comfortable if they have enough money to pay their bills for 1/30 of a month (or 1 day), some people feel this is to much risk and need more to feel comfortable, they may have money saved to pay their bills for 3 to 6 months or more.

Personally, if my savings ever got close to the point where I could only pay my bills for 48 months, it would really worry me.  I probably would start working again in that situation.

I haven’t always been this risk adverse, when I was young and single I didn’t mind if I had 1 or 2 months saved up.  But getting married, having kids, and growing older has changed my point of view and added a lot of months on to my comfort point.

Link that got me started:  living off your income