Savings before taking the leap Savings before taking the leap
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  1. #1

    Nervous Newbie

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    Default Savings before taking the leap

    Hi all, first off thanks for a great site and forum.
    I am ready to make the move to contracting and have been doing my research on all the things i need to have in place before i resign as a permie.
    In my mind one of the most important things i need in place is a safety net in case it takes a while to find a first (or second..) contract. I haven't been able to find any info on how many months living expenses is the norm to have saved up before making the move? I have been thinking enough money saved to keep my current standard of living for 3 months is sufficient, is this an accurate estimate?

  2. #2

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    It's up to you personally and I would say it probably depends on the demand for your profession would be another attributing factor. I made the jump without any savings and was fortunate to land a contract right away if I had, had 3 months savings to cover living expenses that would have been a massive bonus. To me I would say it is enough the key once your in the contracting world is build your war chest and work on a plan B while landing successive contracts, always think ahead.

    Best of luck to you
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  3. #3

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    Even if you go immediately into a new gig, thre's a fighting chance you won't be able to get any money back and into your own account for a month or two anyway (one reason to go umbrella to start with). Business bank accounts and timesheet processing systems invariably never work first time and a couple of weeks will vanish very quickly. Three months would be good if you can get it, but "current standard of living" is the key variable; what money must you have to spend as opposed to what money it's nice to have to spend.
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  4. #4

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    Or you could simply stay permie while looking for a contract and when the contract comes along forfeit your last months pay and simply quit with no notice, assuming permie co. will withould your last months pay in return for giving zero notice and dumping them in the ###t, also assuming you arent going to get sued by doing so and that at no point in the future you'll have work contact with said permie co.

    It really is a personal situation but as Mal says, normal contracts these days are work 1 month, invoice, get paid 30 days later. Thats 2 months without any delays, assuming delays and the time from when you quit to the first contract, you'll need atleast 3 months if not more. Putting that into a figure isnt really possible as 3 months for one person may be equal to 2 weeks for another.
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  5. #5

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    Thanks a lot for the info.
    Shows what a newbie i am, i didn't consider the fact that after invoicing i may not be paid for some time.
    I'm a SAP technical consultant (6yrs), work on various modules/SAP technologies.
    As far as possible i would like to leave my employer on a good note

  6. #6

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    Quote Originally Posted by pimpmycode View Post
    Thanks a lot for the info.
    Shows what a newbie i am, i didn't consider the fact that after invoicing i may not be paid for some time.
    I'm a SAP technical consultant (6yrs), work on various modules/SAP technologies.
    As far as possible i would like to leave my employer on a good note
    From what I can see out there SAP specific stuff comes up fairly regularly and a bit of a closed shop. Job titles always seem to be SAP Service Manager or SAP PM rather than just run of the mill. Rates also appear to be a good bit higher as well (or used to be). Doesn't help get you that first contract tbh but I would be a lot more confident with that kind of experience rather than other technologies.

    Saying that the few SAP consultants I know are on some monster packages that appear to be more than the contractor rates but I don't know SAP well enough to comment any further on that one.
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  7. #7

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    When i took the plunge, i was on a 1 month notice period, i found a contract while still in perm. Booked 2 weeks holiday and threw in my notice once it was approved. I was aware the contract may not have materialised as i did not have a signed copy until 2 days before i started so i ensured i had 3 months living expenses in the bank.

    I had spent a lot of time planning to go into contracting as i am a very risk-adverse person, i had let out my house and was living in a rented room in a friends house so my living expenses were minimal. But that contract was an initial 3-monther but was extended twice and have never looked back. But i reiterate what has already been said about working on a plan-b, this can be invaluable as you do not know what is going to happen with the technology you work in over the next 10 years, and i know for sure i dont want to be in my 40's having to start a new career.

    Everyone is different, but a lot of new contractors i know have spent all their first frw months income on flash cars and gadgets. My advice would be to spend only what you need in the first 6-9 months to build up a decent warchest, i like mine to be sufficient to live off for a year.

    Good luck, and hoping to give you a few bananas in the not-too-distant future

  8. #8

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    You may want to consider going through an umbrella for the first few months, sure it'll be less than you would earn through a LTD with a contract outside IR35 but it gives you the opportunity to see if contracting is for you. There are some on here who will say why bother but I know a few on here did for their first contracts, even the font of all knowledge that is NLUK went umbrella first
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