When I started thinking about leaving my job more seriously, I had about $50,000 in savings. Despite living in New York City and spending about $5,000 to $6,000 per month, I was still earning a bit more than that after taxes.
Intellectually, I started to see myself as someone who had reached a basic level of financial freedom. Each day I went to work, the savings would grow. And given how little I desired in terms of future material comforts, I didn’t feel much pressure or desire to earn a lot more. With this level of security, I started to dream of different possibilities for my life.
With some small reductions in spending, that $50k in savings represented a year of living expenses. This quantity of time, a year, felt important. It was enough time to experiment, to try new things, and to come up with a next step.
I’ve found when things about making a big shift in your life, most people’s decision to make a change can ber simplified to the following formula:
If I had X amount, I would take risk Y for Z period.
This amount, X, is what I call leap capital: An amount or milestone that convinces you it’s reasonable to make a change in your life, either temporarily or permanently.
For me it was $50k and one year. When I quit, I didn’t think past a year. I wasn’t quitting forever, I was just going to test the waters. Even though I was scared, this felt reasonable for me. I felt safe.
I’ve talked to many people thinking about quitting their jobs over the years. For some, $50k is not nearly enough. One guy told me straight faced that once he had $10 million he could finally take a break and write the book he wants to finish. Others need less, like my wife, who quit her and traveled for a few months with only $7,000 to her name.
Another important thing I’ve noticed: The specific amount and math of these milestones matters far less than the story and how it makes the person feel.
Here are the most common stories I’ve seen:
Months of expenses: “I have eighteen months of expenses saved.” This gives you a runway, a predictable way to cover your expenses, and a deadline.
Income replacement: “I’m making $2,000 a month from a side gig right now.” For some people this is enough. Some income is powerful in convincing themselves there is more opportunity if they keep leaning in this direction. For others, its about guilt. Without an income, some feel worthless. Others will never leap unless they replace 100% of their current salary.
Net worth: “I’m worth $2 million, that seems like enough to take a risk.” What I’ve found interesting is that people using this approach often don’t run the numbers. They care much more about total amounts. If they had run the numbers they might have realized it wasn’t quite a big risk to take a year off when they were at $1 million. Regardless, net wroth has become increasingly important to many people, and hitting a milestone can help some shift stories.
One-time sum: For some, a big bonus can convince people to take a leap. They tell themselves, “I’m not buying a car, I’m going to buy a sabbatical.” Other examples of this include getting an inheritance, and investment, or winning a grant like the O’Shaughenessy Fellowship.
Gift From Past Self: For me, one thing that helped me early on was considering money I earned in consulting a “gift from my former self.” I’m not sure why this worked so well, but it cracked me up thinking about my spreadsheet self making a presentation telling me why he was investing in my wanderings and creative experiments.
What is the leap capital you need?
