6 ms·

It's not that I disagree, especially with the opinion that the gaming industry is over-saturated and that a lot depends on luck in that industry. But I'd say th

by flexie 9y ago

It's not that I disagree, especially with the opinion that the gaming industry is over-saturated and that a lot depends on luck in that industry. But I'd say that 4 months worth of savings is in the better end when starting a new business. Most people who do startups or who otherwise become entrepreneurs have much less than that. And I think having too much of a cushion can lull you into a false sense of "doing something right" and that needing revenue soon can be an excellent motivator. I was about to get married when I quit my job and started by myself, and my wife also had to quit her job because we moved country. And we honestly didn't really work out whether we were in a bit of debt or if we had savings for a few weeks. Sure, the first 6 months without pay were hard, and so were the next few years with low pay, especially when we had kids. But if having 6 or 12 months worth of savings is a requirement, then you can rule out just about everyone except rich kids and upper middle class teenagers.

yuliyp 9y ago
4 months of expenses, not necessarily 4 months of full-time-employment income.
zelos 9y ago
Maybe I'm just way too risk-averse, but 3-4 months of expenses in savings is what I'd consider a minimum while in a stable full-time job.
- oneeyedpigeon 9y ago
  Yes, our mortgage advisor recommended a certain buffer amount in savings, and it was quite a lot. Either one year or 18 months, and I think that was combined income. That was just to ensure the mortgage could still be paid for a while if we both lost our jobs. I'm personally planning for an exit strategy which will see me working for myself in about 6 months time. I have roughly one year's take-home pay and will ideally have 18-24 months by the time I quit.
  - rahimnathwani 9y ago
    It sounds like the mortgage advisor encouraged you to borrow a larger sum, so that she/he could get a larger commission. There's no need to keep that much money in the bank just in case you lose your job and can't pay your mortgage. Most lenders (at least where I'm from) will arrange a payment holiday if you tell them you've lost your job. After all, they benefit by earning more interest whilst you're not making payments. Of course, there are many other good reasons to want that much liquid cash in the bank.
    - milesvp 9y ago
      1 year in the bank (CD/savings) is for multiple reasons. Mostly it's for that really nasty scenario where there's a major recession leading to household job loss, when it can be particularly hard to find an equivalent replacement salary. And cash equivalent is important because selling assets in a down market is doubly expensive. Worse is a down market may make the mortgage lender even more likely to foreclose in the hopes of extracting some short term gains to offset losses in other investments. So you risk a losing your equity just by missing a single payment. I certainly don't drop every dollar into my mortgage every month, it's just not worth the risk for a potential 4% return on investment.
      - rahimnathwani 9y ago
        I don't know if these exist in other countries, but some banks in the UK offer an 'offset mortgage', where any balance in a specific current account at the same bank deducted from the loan amount when calculating interest. The last time I looked, they were a little more expensive than regular mortgages, but would be worthwhile for someone who keeps 6 months or more of mortgage payments in their current account.
- jaymzcampbell 9y ago
  I completely agree. There's a hell of a lot to be said for having a buffer like this for your mental health. When a long-term relationship I was in collapsed and I was struggling with a bad environment at work the one thing that stopped me from spiralling back to a more dangerous form of depression was the comfort and knowledge of having immediate expenses covered. It gave me enough breathing room to know I didn't have to panic or run away from it all. I really couldn't imagine taking on a mortgage with so little cash in the bank and relying on Steam sales. If the author could go contracting instead it seems like they'd be able to carry on with their journey between contracts. It's not perfect but would be preferable to the situation they're in now. Re. the GP's comment though - I don't understand how you could do this without any savings, there must've been some? At least rent (assuming you don't live with parents), food, internet connection - it has to be paid somehow surely - either by "you" (through savings) or family/friends taking the hit (eg letting you crash, using their facilities). With the right setup and network you could live extremely cheaply but someone is going to be paying for it. I don't think this is limited to rich kids or upper middle class teenagers (not sure of the focus on children rather than independent adults?) - if the average person can save for a holiday or whatnot - they could equally save towards living expenses, even if only "paying for my own food whilst I stay on my friends sofa rent free".
- TAForObvReasons 9y ago
  Forget 3 months, the rule of thumb is 6 months for an emergency fund
  - cheschire 9y ago
    And twice your salary in a retirement fund by the age of 30, and three times your salary in retirement by 35. Basically quit your day job only if your side hustle is already making more money per month (not per hour) because odds are even making more per month is still going to result in not being able to survive much past 57. Side note, how many 57 year old indie game devs are there?
    - alchemism 9y ago
      How does the average American put tens of thousands of dollars into a retirement account within 5 years at a point in life where there is a morgage and/or children? That does not seem like conventional wisdom.
      - NikolaeVarius 9y ago
        Don't do the mortgage and children.
      - selectodude 9y ago
        It's conventional wisdom in the same way that you're supposed to drink 8 glasses of water and eat 5 servings of vegetables ever day. The average American doesn't do what is "conventional wisdom".
      - toast0 9y ago
        It's doable if you get 5% annual growth on the balance, and put in 10% of salary. I ignored compounding, and assumed your income was flat.
      - astockwell 9y ago
        This is the conventional "textbook" wisdom. It is obviously desirable, but in real life completely impossible. And the gap between reality and this kind of "on-high" prescription is why so many people/families have no savings and have no real way to get out of their current situation.
- gambiting 9y ago
  Huh. I mean, I'm in a full time stable job and I don't keep that much in savings. Nowhere near in fact. But then again if the company wanted to fire me it would have to give me at least 3 months notice,so I treat that as my "buffer" to find a new job while still getting paid.
hennsen 9y ago
4 months savings is nothing in self-employment or for freelancing. A million things can happen that delay payment and sales coming in. A year to keep personal and businesses cost running is a good and sane minimum that also keeps your mind from the worries you get when suddenly alteady 2,5 of these 4 months are gone and another expected positive sales/payment event didn’t happen for whatever, maybe accidental, reason. (Says a 10 year running freelancer who started with 12 months savings and currently runs on only 5 for some events in the past 2 years - but luckily with good project and customer base)
hennsen 9y ago
And about that: > But if having 6 or 12 months worth of savings is a requirement, then you can rule out just about everyone except rich kids and upper middle class teenagers. If you’re a good Software developer and have no idea how to save some 20-30k bucks in 2-3 years for your plan of your own business you’re doing something wrong. Like you are bad at contract negotiations, no good contact network in the industry to find someone willing to pay for good people, have too high expenses, too low saving potential, or, you’re just not as good of a dev as you think. Any of those should be reason enough for you to think again about your plans. And don’t hate me for being honest, better be honest to yourself...
- axisK 9y ago
  I don't think life is that simple. Being a skilled developer/engineer has very little to do with the ability to save money.
  - hennsen 9y ago
    Aehm yes these are independent qualities. And i didn’t state they are connected. But both (and other business stuff as mentioned that doesn’t come automatically just by being a great dev)are helpful if you wanna bootstrap a small company / freelance business without external funding. You can be lucky and be so well paid for being a so great dev that you never need to save, but it’s good to be able to save when anything doesn’t work out as good as dreamed. I state you need more that tech skills to be successful. If you don’t have these other skills, better keep in a “safe” employment. But also then i recommend to work on some of these, like at least the negotiation stuff. It will help you.
- emodendroket 9y ago
  The post says the guy lives in Eastern Europe.
  - foobarian 9y ago
    That'a big deal. EE = most likely no property tax, which makes a vast difference in financial planning compared to the west. Basically if you're lucky to have a house or apt. you're set for good.
ska 9y ago
But if having 6 or 12 months worth of savings is a requirement, then you can rule out just about everyone except rich kids and upper middle class teenagers. Here you have hit the nail on the head - of why most successful founders come from at least a bit of money. Not all, of course. But is sure helps. The point isn’t really how many months of savings you have, it’s what sort of safety net yo have in practice. Does anyone have your back if you can’t make rent payments?
lettergram 9y ago
I mean, I'm 25, married, about to have a kid, a nice house, full-time job, two months emergency fund in the bank (after buying my house this year), and a stupid monthly payment in student loans (larger than most mortgages with my wife and I combined). I'm also from a poor class family, who worked up, got a job, etc. Because I'm white most burden scholarships I couldn't get, so I got a fair amount from research etc. I wasn't going hungry poor, but I did have to buy my own clothes, pay for school, lunch, what ever, at 14 poor. Now, I've been planning since I went to school to start my own business. Next year's bonus (which is 2 - 3 months living expenses), plus tax return (estimated 2 months living expenses) gives me right around 6 months living expenses. That's 3 years out of school. There is no reason people looking to start a company cant be patient and get some savings first. I actually have two websites making profit (albeit small) at the moment: https://easy-a.net/ https://easy-a.net/ https://projectpiglet.com/ https://projectpiglet.com/ Both of those were completed while on vacation from work or weekends. And both are growing rather consistently and I should be able to leave my current role in the next year. I grant it's a stupid amount of work (I work ~80 hours a week, or 12 hours every single day), but there is no reason people from a poor background can't have savings AND start a business. Just a different perspective. Kudos to you for making it work though.
- pers0n 9y ago
  Just because your white doesn’t mean you don’t get scholarships, trust me many minorities don’t get squat
JabavuAdams 9y ago
Four months is nothing. Especially for the games industry -- you're not going to get outside funding in any realistic scenario. Also people who commit to making an indie game in a short time-frame rarely do service work to fund it.
JabavuAdams 9y ago
> But if having 6 or 12 months worth of savings is a requirement, then you can rule out just about everyone except rich kids and upper middle class teenagers. Disagree, but I suppose it's highly dependant on location and salary. The last time I worked for a game company, I made $95k/yr, which equated to $5002/mo after taxes and deductions. This is in Toronto, Canada. An expensive 1-bedroom luxury apartment steps from the subway was $2100/mo. My share of daycare cost for the kids was another $900 or so. Heating/electricity $100. Totally unoptimized mobile phone and fiber internet, another $220. Car insurance and home insurance, another $300. Gasoline $100. So, $1280 left over for food and random stuff. Let's say I bothered with any kind of cost-control: I could probably save $900 / mo. That's 2 mos salary in savings every year. After 10 years, that's 20 months in savings, without compounding or other windfalls. In fact, I'm now in a 2BR apartment that's $400 cheaper /mo. EDIT> Forgot Long-term disability insurance, Life insurance, and medications. Call that another $500, but about $300 of that is meds. If you're young and healthy, or have full health insurance, hopefully you're paying less for medication.
unreal37 9y ago
It seems the author saved around $2000 before quitting his job. And promptly spent $1000 of it on paperwork and such. I know 4 months sounds like a lot, but $2000 does not sound like a lot.
wolco 9y ago
4 months worth of savings really lowers your chance of surviving the first few customers. You want to feel safe so you can take calculated risks.

by flexie 9y ago

yuliyp 9y ago

4 months of expenses, not necessarily 4 months of full-time-employment income.

zelos 9y ago

Maybe I'm just way too risk-averse, but 3-4 months of expenses in savings is what I'd consider a minimum while in a stable full-time job.

oneeyedpigeon 9y ago
Yes, our mortgage advisor recommended a certain buffer amount in savings, and it was quite a lot. Either one year or 18 months, and I think that was combined income. That was just to ensure the mortgage could still be paid for a while if we both lost our jobs. I'm personally planning for an exit strategy which will see me working for myself in about 6 months time. I have roughly one year's take-home pay and will ideally have 18-24 months by the time I quit.
- rahimnathwani 9y ago
  It sounds like the mortgage advisor encouraged you to borrow a larger sum, so that she/he could get a larger commission. There's no need to keep that much money in the bank just in case you lose your job and can't pay your mortgage. Most lenders (at least where I'm from) will arrange a payment holiday if you tell them you've lost your job. After all, they benefit by earning more interest whilst you're not making payments. Of course, there are many other good reasons to want that much liquid cash in the bank.
  - milesvp 9y ago
    1 year in the bank (CD/savings) is for multiple reasons. Mostly it's for that really nasty scenario where there's a major recession leading to household job loss, when it can be particularly hard to find an equivalent replacement salary. And cash equivalent is important because selling assets in a down market is doubly expensive. Worse is a down market may make the mortgage lender even more likely to foreclose in the hopes of extracting some short term gains to offset losses in other investments. So you risk a losing your equity just by missing a single payment. I certainly don't drop every dollar into my mortgage every month, it's just not worth the risk for a potential 4% return on investment.
    - rahimnathwani 9y ago
      I don't know if these exist in other countries, but some banks in the UK offer an 'offset mortgage', where any balance in a specific current account at the same bank deducted from the loan amount when calculating interest. The last time I looked, they were a little more expensive than regular mortgages, but would be worthwhile for someone who keeps 6 months or more of mortgage payments in their current account.
jaymzcampbell 9y ago
I completely agree. There's a hell of a lot to be said for having a buffer like this for your mental health. When a long-term relationship I was in collapsed and I was struggling with a bad environment at work the one thing that stopped me from spiralling back to a more dangerous form of depression was the comfort and knowledge of having immediate expenses covered. It gave me enough breathing room to know I didn't have to panic or run away from it all. I really couldn't imagine taking on a mortgage with so little cash in the bank and relying on Steam sales. If the author could go contracting instead it seems like they'd be able to carry on with their journey between contracts. It's not perfect but would be preferable to the situation they're in now. Re. the GP's comment though - I don't understand how you could do this without any savings, there must've been some? At least rent (assuming you don't live with parents), food, internet connection - it has to be paid somehow surely - either by "you" (through savings) or family/friends taking the hit (eg letting you crash, using their facilities). With the right setup and network you could live extremely cheaply but someone is going to be paying for it. I don't think this is limited to rich kids or upper middle class teenagers (not sure of the focus on children rather than independent adults?) - if the average person can save for a holiday or whatnot - they could equally save towards living expenses, even if only "paying for my own food whilst I stay on my friends sofa rent free".
TAForObvReasons 9y ago
Forget 3 months, the rule of thumb is 6 months for an emergency fund
- cheschire 9y ago
  And twice your salary in a retirement fund by the age of 30, and three times your salary in retirement by 35. Basically quit your day job only if your side hustle is already making more money per month (not per hour) because odds are even making more per month is still going to result in not being able to survive much past 57. Side note, how many 57 year old indie game devs are there?
  - alchemism 9y ago
    How does the average American put tens of thousands of dollars into a retirement account within 5 years at a point in life where there is a morgage and/or children? That does not seem like conventional wisdom.
    - NikolaeVarius 9y ago
      Don't do the mortgage and children.
    - selectodude 9y ago
      It's conventional wisdom in the same way that you're supposed to drink 8 glasses of water and eat 5 servings of vegetables ever day. The average American doesn't do what is "conventional wisdom".
    - toast0 9y ago
      It's doable if you get 5% annual growth on the balance, and put in 10% of salary. I ignored compounding, and assumed your income was flat.
    - astockwell 9y ago
      This is the conventional "textbook" wisdom. It is obviously desirable, but in real life completely impossible. And the gap between reality and this kind of "on-high" prescription is why so many people/families have no savings and have no real way to get out of their current situation.
gambiting 9y ago
Huh. I mean, I'm in a full time stable job and I don't keep that much in savings. Nowhere near in fact. But then again if the company wanted to fire me it would have to give me at least 3 months notice,so I treat that as my "buffer" to find a new job while still getting paid.

hennsen 9y ago

4 months savings is nothing in self-employment or for freelancing. A million things can happen that delay payment and sales coming in. A year to keep personal and businesses cost running is a good and sane minimum that also keeps your mind from the worries you get when suddenly alteady 2,5 of these 4 months are gone and another expected positive sales/payment event didn’t happen for whatever, maybe accidental, reason. (Says a 10 year running freelancer who started with 12 months savings and currently runs on only 5 for some events in the past 2 years - but luckily with good project and customer base)

hennsen 9y ago

And about that: > But if having 6 or 12 months worth of savings is a requirement, then you can rule out just about everyone except rich kids and upper middle class teenagers. If you’re a good Software developer and have no idea how to save some 20-30k bucks in 2-3 years for your plan of your own business you’re doing something wrong. Like you are bad at contract negotiations, no good contact network in the industry to find someone willing to pay for good people, have too high expenses, too low saving potential, or, you’re just not as good of a dev as you think. Any of those should be reason enough for you to think again about your plans. And don’t hate me for being honest, better be honest to yourself...

axisK 9y ago
I don't think life is that simple. Being a skilled developer/engineer has very little to do with the ability to save money.
- hennsen 9y ago
  Aehm yes these are independent qualities. And i didn’t state they are connected. But both (and other business stuff as mentioned that doesn’t come automatically just by being a great dev)are helpful if you wanna bootstrap a small company / freelance business without external funding. You can be lucky and be so well paid for being a so great dev that you never need to save, but it’s good to be able to save when anything doesn’t work out as good as dreamed. I state you need more that tech skills to be successful. If you don’t have these other skills, better keep in a “safe” employment. But also then i recommend to work on some of these, like at least the negotiation stuff. It will help you.
emodendroket 9y ago
The post says the guy lives in Eastern Europe.
- foobarian 9y ago
  That'a big deal. EE = most likely no property tax, which makes a vast difference in financial planning compared to the west. Basically if you're lucky to have a house or apt. you're set for good.

ska 9y ago

But if having 6 or 12 months worth of savings is a requirement, then you can rule out just about everyone except rich kids and upper middle class teenagers. Here you have hit the nail on the head - of why most successful founders come from at least a bit of money. Not all, of course. But is sure helps. The point isn’t really how many months of savings you have, it’s what sort of safety net yo have in practice. Does anyone have your back if you can’t make rent payments?

lettergram 9y ago

I mean, I'm 25, married, about to have a kid, a nice house, full-time job, two months emergency fund in the bank (after buying my house this year), and a stupid monthly payment in student loans (larger than most mortgages with my wife and I combined). I'm also from a poor class family, who worked up, got a job, etc. Because I'm white most burden scholarships I couldn't get, so I got a fair amount from research etc. I wasn't going hungry poor, but I did have to buy my own clothes, pay for school, lunch, what ever, at 14 poor. Now, I've been planning since I went to school to start my own business. Next year's bonus (which is 2 - 3 months living expenses), plus tax return (estimated 2 months living expenses) gives me right around 6 months living expenses. That's 3 years out of school. There is no reason people looking to start a company cant be patient and get some savings first. I actually have two websites making profit (albeit small) at the moment: https://easy-a.net/ https://easy-a.net/ https://projectpiglet.com/ https://projectpiglet.com/ Both of those were completed while on vacation from work or weekends. And both are growing rather consistently and I should be able to leave my current role in the next year. I grant it's a stupid amount of work (I work ~80 hours a week, or 12 hours every single day), but there is no reason people from a poor background can't have savings AND start a business. Just a different perspective. Kudos to you for making it work though.

pers0n 9y ago
Just because your white doesn’t mean you don’t get scholarships, trust me many minorities don’t get squat

JabavuAdams 9y ago

Four months is nothing. Especially for the games industry -- you're not going to get outside funding in any realistic scenario. Also people who commit to making an indie game in a short time-frame rarely do service work to fund it.

JabavuAdams 9y ago

> But if having 6 or 12 months worth of savings is a requirement, then you can rule out just about everyone except rich kids and upper middle class teenagers. Disagree, but I suppose it's highly dependant on location and salary. The last time I worked for a game company, I made $95k/yr, which equated to $5002/mo after taxes and deductions. This is in Toronto, Canada. An expensive 1-bedroom luxury apartment steps from the subway was $2100/mo. My share of daycare cost for the kids was another $900 or so. Heating/electricity $100. Totally unoptimized mobile phone and fiber internet, another $220. Car insurance and home insurance, another $300. Gasoline $100. So, $1280 left over for food and random stuff. Let's say I bothered with any kind of cost-control: I could probably save $900 / mo. That's 2 mos salary in savings every year. After 10 years, that's 20 months in savings, without compounding or other windfalls. In fact, I'm now in a 2BR apartment that's $400 cheaper /mo. EDIT> Forgot Long-term disability insurance, Life insurance, and medications. Call that another $500, but about $300 of that is meds. If you're young and healthy, or have full health insurance, hopefully you're paying less for medication.

unreal37 9y ago

It seems the author saved around $2000 before quitting his job. And promptly spent $1000 of it on paperwork and such. I know 4 months sounds like a lot, but $2000 does not sound like a lot.

wolco 9y ago

4 months worth of savings really lowers your chance of surviving the first few customers. You want to feel safe so you can take calculated risks.