Overcoming The “One More Year” Syndrome To Do Something New
I faced a number of fears upon graduating from college: 1) Getting stuck in a terrible job, 2) Not making enough to comfortably support a family of four, 3) Not being able to financially help my parents if they needed assistance, 4) Not leading a fulfilling life, and 5) Never realizing my potential… to name a few. You could say I feared failure the most. Over time, my fear of failure was replaced with the fear of regret.
After ten years of working on Wall St., I started feeling comfortably numb in a job that paid a lucrative salary. Although my interest in the financial services business began to wane towards the end, I kept telling myself that all I had to do was gut it out for one more year to bank another six figure bonus. I discussed the “one more year” syndrome with a number of close colleagues and they all admitted to suffering the same plight. Why do something else when very little else pays as much?
Originally, I had planned to work for 18 years until age 40 and then call it quits. Instead, I only lasted for 13 years right before the age of 35 before going off on my own. Giving up a multiple six figure income in one’s 30s sounds ludicrous, I know. But you have to understand that I had been living way below my means since graduation so I’ve never really experienced what it’s like to live a multiple six figure lifestyle. I didn’t anticipate such a collapse in the financial markets nor did I anticipate the X Factor of online growth. Besides, happiness tops out at $200,000 anyway.
The only monster expense I had post college was for a 20% downpayment on my current house eight years ago. My main rental that was purchased 10 years ago was from stock market funny money, so that didn’t count. 70% of my income for the last five years was saved, providing no utility except for financial comfort. I realized one day that I’ve been content for a very long time already but wasn’t really aware.
HOW TO OVERCOME THE “ONE MORE YEAR” DISEASE
If I worked for five more years I probably could have saved another $1 million dollars or so in cash. The $1 million would be a nice extra cushion in retirement. I could replace Moose with something new that contains fresh airbags and Bluetooth. I could perhaps feel more comfortable paying for business class plane tickets a couple times a year instead of always slumming it in coach. But other than a new car and more pleasant travel, there’s nothing more I want. A children’s education fund is set up, I own my primary residence, 13 year old Moose still rolls fine, I don’t need more clothes, and my travel fund can comfortably take me anywhere for six weeks a year. An extra $1 million dollars wouldn’t make a lick of difference to my lifestyle, but slaving away in a structurally declining industry would make life worse.
The main thing I lacked was time. What’s the use of having money if you can’t spend it? While we are students we have all the time in the world but no money. While we work, we have money but not enough time. As a result of this paradox, in 2009 I got to thinking about how to manufacture both time and enough money to lead my current lifestyle. After three years of experimentation and a lot of analysis, I finally pulled the rip chord in 2012.
I’d like to share with you some thoughts on how I finally eliminated “one more year” from my mind. I know many of you are having the same concerns as I did for so many years.
1) Have a plan with a specific date. Once you come up with your plan and run the pro forma numbers on how much you need to sustain a lifestyle you enjoy, continue running different scenarios to see how long it will take to get there. Then proceed to select a year, a month, and perhaps even a day to take off on your own. The process is the same thing with managing your 401(k) retirement funds for a more financially secure retirement.
When I started in 2009, I knew there was potential to generate income online, but I wasn’t focused on that aspect for the first year at all. All I wanted to do was write and connect with our great community. Only in 2010 did I start getting excited about the potential of one day working for myself. I set a 12 month target to earn a subsistence level wage. My 24 month target was then to earn 1.5X the US per capita income. I never waited for my 36 month target because by 2012 I had figured out how to get laid off and received all my deferred compensation, vacation days, health care, and a nice severance package after 11 years of working at one firm. The total severance package gave me literally a six year runway to reach my ultimate goal of generating the same amount of money with absolute freedom.
2) Use the regret minimization framework. Jeff Bezos of Amazon said it best when he was interviewed about why he decided to quit his Wall St. job mid-year, forsaking a juicy year end bonus to start Amazon. Jeff projected himself to age 80 and wanted to minimize the number of regrets in his life. He knew that when he was 80, he wouldn’t regret trying his hand at entrepreneurship. Even if he failed, he wouldn’t regret the effort in participating in “this thing called the Internet.” But he felt the one thing that would haunt him forever was if he didn’t try. After putting the pieces together in his framework, his decision to leave became very simple.
I firmly believe that we will regret more the things we don’t do than the things we do end up doing. One of my favorite ex-colleagues was the receptionist. We shot the shit every day for a few minutes during lunch time. At 54, he told me his biggest regret was not going after his dreams of dealing in Japanese memorabilia. He’s now stuck in this dead end job with not much money to show for. One day I came to work and he was gone. Start imagining the worst case scenario and either get acclimated or make moves to avoid such a scenario.
3) Test out living on less. Despite having around 18 years worth of living expenses saved by age 33, I was STILL nervous about losing my income of 13 years. I distinctly remember sitting with a group of folks in a hot tub in Tahoe back in 2010 asking everybody their savings number before they went on their own. The average came out to just two years. As a result, I did some careful calculations of my passive income generation ability and typed it up in a post entitled, “Achieving Financial Freedom One Income Slice At A Time.” Until this post, I actually did not know how much passive income was being generated from my rental properties, CD accounts, and dividend stocks because everything was always just reinvested. Although I spend more than my passive income production, I found comfort knowing that I wasn’t going to starve if I was an absolute failure online.
Before taking the leap, I suggest everybody try and live on 50% less income than normal for three months and see how you do. Another good exercise if you are married is for both of you to live of your spouse’s income and draw down your savings if necessary to see how it feels to go in reverse. You won’t know the pain of living off savings until you actualy do it, so don’t cheat. Really cut down your extraneous expenses such as eating out, going on vacation, driving on the weekends, and buying wants you don’t need. I’m pretty sure everybody has fat to cut from their budget.
4) Calculate your upside. Everybody just thinks about the downside if they leave their jobs. Mine was roughly $1 million in cash over the next five years. Once I knew my downside, it was much easier to calculate my potential upside. To save a similar amount, I’d have to generate $300,000-$500,000 a year depending on how much I save and how much revenue I can shield from taxes. The figure sounds like a lot until I realized there’s another way to cover a $1 million dollar loss.
If you create a viable business you will inevitably have others who will want to pay a multiple for your income stream. If I am able to generate $250,000 in annual operating profit and someone pays me a 6X multiple, I should be able to bank $1 million after taxes. There have been numerous multi-million dollar blog sales in the personal finance space over the years, and I have the confidence and the knowledge to join the crew in time if I want to exit. I’m very bullish on blogging because of the proliferation of the internet. Consumers no longer want to read the news, they want to participate in the news and interact.
5) Remind yourself that you aren’t getting any younger. Death is a finality. There is no rewind button in life! My 20s flew by and now my 30s are going by even faster. Pretty soon I’ll be 40 years old and gray hair will start popping up everywhere. Life speed accelerates because every year we live is a greater portion of the time we have left. I think about death and the brevity of life every time I hear some celebrity die too soon. James Gandolfini of The Sopranos dying at age 51 is the latest example.
If you knew you were going to die at 50, I’m absolutely sure you would treat life differently. If you are older than 50 and knew you were to die in 10 years, I’m sure some of your most stubborn habits would change. Although somewhat morbid, I have a mental note of dying at age 60 which helps spur me to stop being so lazy and continuously try new things. If I live past 60, then great! If I die at 60, then that’s what I’ve been expecting all along.
DON’T GET CAUGHT UP WITH THE MONEY
Making a lot of money is nice, but having a lot of time to do what you want is even nicer. Some of my happiest moments were as a broke college student or a young grunt working craptastic jobs. Now that I’ve worked for myself for the past 12 months, there’s no way I’m going to regret not having worked five more years on Wall St even if I stop making a single dollar tomorrow. The experience of trying to create a location independent business has been exhilarating!
I don’t recommend anybody take a blind leap of faith. If you don’t thoroughly test your business model through multiple difficult scenarios there’s a good chance you will fail. Again, it took me three years since I launched this site to finally say goodbye to Corporate America. Even after I said goodbye, a part of me longed to go back due to the camaraderie and the comfort of a steady paycheck.
Stress test your income streams. Be absolutely analytical and face the reality that your net worth may stall or even decline for a while. Even if you fail, you can always go back to work or live in your parent’s basement to replenish funds. After the third year of “one more year” in your mind, it’s time to get off the pot and make your move.
Recommended Actions Before Breaking Free
* Manage Your Finances In One Place: The best thing you can do to grow your net worth is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to track my finances. Now, I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and where my spending is going. Their 401K Fee Analyzer tool is saving me over $1,000 a year in fees I had no idea I was paying. There is no better free platform out there that is helping me manage my money as I live a free life post Corporate America. The entire sign-up process takes less than a minute.
* Check Your Credit Score: Check your credit score at least once a year given the risk of identity theft as well as the importance of having a good credit score if you ever are in need of a loan. For over a year, I thought I had a 790ish credit score and was fine, until my mortgage refinance bank on day 80 of my refinance told me they could not go through due to a $8 late payment by my tenants from two years ago. My credit score was hit by 110 points to 680 and I could not get the lowest rate. I had to spend an extra 10 days fixing my score by contacting the utility company to write a “Clear Credit Letter” to get the bank to follow through. Check your credit score for free at GoFreeCredit.com and protect yourself. The last thing you want to do during your new journey is unknowingly have poor credit that may short circuit your new ventures.
* Negotiate A Severance Package: Never quit your job, get laid off instead. Negotiating a severance enabled me to receive six years worth of living expenses from a company I dedicated 11 years of my life to. If I had quit, I wouldn’t get any severance, deferred compensation, medical benefits, job assistance training or unemployment benefits. I believe so strongly in never quitting that I spent a couple years to write a 100-page book entitled, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.” I’m absolutely certain this book will help you recognize your rights as an employee and break free from the corporate grind to do something you truly want to do.
Photo: A idyllic lakeside house on Lake Lucerne, Switzerland, 2013.