Everybody fantasizes about being their own boss. Yet very few people take the leap of faith because they either don’t have an idea, don’t have the financial means, or don’t have the confidence to execute. But I tell yah, early retirement is exactly like being an entrepreneur: so awesome!
It took me almost three years of moonlighting on Financial Samurai as a personal finance journal before realizing I might be able to make enough money to survive off this site.
And here’s the thing. You don’t have to go all-in with your business! It’s not like in the past where you had to set up a brick and mortar shop, borrow money from the bank, buy lots of inventory and equipment, sign a one year rental lease agreement, and hire people in hopes of just making it. Now you can simply start your own business for under a hundred bucks a year on the side.
I left my multiple-six-figure day job in banking at the age of 34 due to three main reasons:
- Saved and invested aggressively for 13 years
- Negotiated a severance package that paid for 5-6 years of normal living expenses after 11 years at my job
- Started Financial Samurai when I was 31
My savings and investments gave me the confidence to dream of a different life. The severance was the catalyst to take the leap of faith. Finally, running Financial Samurai was something I loved to do. Make sure you retire to something, not from something.
Early Retirement And Being Your Own Boss
Despite making much less than my day job my first two years of going solo, I was much happier. How is it possible to make 80% less, but feel at least 50% happier? The simple reason is because I controlled my destiny.
All I’ve ever wanted was a correlation with effort and reward. I’m sure many of you wish the same thing as well. Very few day jobs provide an absolute meritocracy.
Can you imagine working harder than your peers only to get a 3% raise? How demoralizing! No wonder it’s so easy to lose your motivation after several years on the job. How about seeing loyal soldiers work for years only to get laid off? Not good.
But imagine a scenario where the sky is the limit. I’m sure many of you would work much harder and be much happier if you knew there was a stronger correlation between good work and reward. 100% of the spoils go to you, instead of only 3% to you and 97% to your company and its overpaid management team.
Being your own boss is like a short cut to early retirement. As someone who went through an identity crisis an an early retiree and then as a online entrepreneur for the first two years, I can say with absolute certainty the feelings of retiring early and being your own boss are EXACTLY THE SAME.
So for those of you who aren’t able to retire before 65, or those who still have a ways to go before retiring early, starting your own business may give you a whiff of what a free life smells like.
And for those who retired early, but don’t have the energy to be an entrepreneur, you’re living a similar reality!
Killing Two Birds With One Stone With Entrepreneurship
I now believe starting a website while in retirement is the perfect combination for all retirees.
The biggest problem with retiring early isn’t the lack of money, because you wouldn’t be able to retire early in the first place if you didn’t have money. The biggest problem with retiring early is BOREDOM. With so many more hours of free time a day, you will easily get bored if you don’t have something meaningful to do.
For the first year and a half after leaving my day job, I constantly found myself bored by 10am. My writing was done by then and everybody I knew was at work.
There were many days when I’d just chill in Golden Gate Park twiddling my thumbs waiting for somebody to show up to play a pickup game of tennis. It didn’t matter if they were terrible, I just needed something to do.
My wife was a night owl, which mean should would often sleep in until 9am or 10am. I woke up regularly by 5:30am while it was still dark. I was conditioned for 11 years to get into the office by 6:30am PST before the stock market opened.
Having a family would instantly cure my boredom, but a family takes time to create. The next best thing is having Financial Samurai, where I can instantly connect with readers every day.
Boredom is not the worst feeling in the world. But if you’ve been used to constant stimulation for years thanks to work, boredom can really change your attitude for the worse. It’s important to keep your mind stimulated during retirement. Everybody needs a purpose, no matter how small.
You Don’t Have To Register As An LLC Or S-Corp
Another stumbling block people have is feeling like they need to register as an LLC or S-Corp to start a legitimate business. This isn’t true. You can simply be a sole proprietor without a business ID number, just your social security number.
All you do as a sole proprietor is earn income as a freelancer. You report the income on your Schedule C tax document, where you can deduct all your business expenses. You can contribute some of your profits to a retirement plan, like a Solo-401k. Then you pay taxes on your operating income, which is your profit before tax.
The main reasons for starting an LLC or S-Corp are liability protection purposes, dividing ownership, and having an asset to sell sometime down the line. You can’t sell yourself. Well you could, but that would mean you’d be an employee again.
I didn’t create my S-Corp until after I left my job because before then, I was just writing purely as a hobby. My severance negotiation book wasn’t published yet and I wasn’t selling anything.
If you plan to moonlight on the side, it actually might be best to not incorporate your company. Many companies have outside interest limitations because they want their employees to focus on their jobs. There’re also business taxes you must pay.
But if your business starts gaining traction, you might as well incorporate and take it more seriously. Besides, there’s no limitation to free speech if you were to start a blog.
Finally, if you remain a sole proprietor, make sure you have some type of protection in terms of an umbrella policy so that in the unfortunate case when someone wants to go after you, your assets are protected.
Comparing Work, Early Retirement, And Entrepreneurship
Now onto some more concrete numbers to prove my point that early retirement and entrepreneurship are eerily similar!
Based on my experience as a day job worker, early retiree, and entrepreneur, I’ve created this chart comparing the three in the most objective way possible.
I rate each of the five variables on a scale of 1 – 10, 10 being the best/easiest and total the scores. The numbers have been crossed checked by a number of other people who’ve experienced all three stages like me.
Go through each and give your own rating. Let me know where you strongly disagree. It’s pretty amazing Early Retirement and Being Your Own Boss both scored the same.
Autonomy:
Autonomy can be defined as freedom. Thus, early retirement wins hands down. Entrepreneurship, however, isn’t far behind. When you’re your own boss, you still have obligations to clients. You don’t have to look at your calendar in early retirement to see what’s on deck. Work is pretty horrible for autonomy unless you are the boss in a satellite office.
Fulfillment:
Being your own boss is the clear winner because you’re actively doing what you love. Hopefully, people who are in their early retirement phase can also gravitate towards doing what they love due to having more spare time.
Volunteer work is extremely fulfilling. So is connecting with people online and sharing your experiences. Fulfillment is why those who are able to retiree early should start their own business. It’s an incredible joy to do something you love when there’s no pressure to make any money.
I can see my score of 5 for the Day Job category as being debatable. But even if you raised the score to a 8-10, the total score for Day Job still wouldn’t match Entrepreneurship and Early Retirement’s scores.
Money:
In the initial stages, it’s much easier to make money from a day job than it is as an entrepreneur. A paycheck is steady, and hopefully you’ll get raises and promotions.
It’s harder to make money in early retirement because you’re not motivated by money. Freedom and fulfillment are your priorities. However, when nobody is pushing you, it’s easy to get lazy.
Initially, it’s difficult to make money as an entrepreneur. You need to survive long enough to build a brand and create a loyal following. But once you get over the initial hump, the money is far, far greater than any day job. The richest people in the world are all entrepreneurs, not folks with day jobs.
Here’s a detailed post about how much bloggers make for a living. I think you’ll be surprised by the income potential compared to the median household income of ~$65,000 in America in 2020.
Below is a real example of how much one of my blogger friends makes with 300,000 pageviews a month. $151,200 a year from his website alone ain’t too shabby!
Difficulty:
A day job is a walk in the park compared to being your own boss (9 = easy). Go to work, do some work, do as you’re told, and leave it all behind once you go home.
As an entrepreneur, you’re always on call. You’ve got to be the CEO, CFO, COO, and CMO of your business. But that’s the fun part of it! When you’re thinking and working 100% for yourself, it doesn’t feel so much like work. It feels like fulfillment!
To make things less difficult, you can hire freelancers to help you with areas you don’t like e.g. taxes.
Thankfully, it’s never been easier to start your own website than it is today. Back in 2009, I paid a guy from Craigslist $300 to come over to my house to launch a website. It was called RichBy30RetireBy40. The site stunk, so I scrapped it and hired another guy for $1,000 to launch Financial Samurai. Then I had to pay another $500 for some graphics and customization work.
Today, anybody can start a website for less than $3/month in 30-60 minutes with Bluehost. It’s so cheap and easy to start from the comfort of your own home.
Happiness:
The initial euphoria of getting a job wears off after a year or two. Sooner or later, a job becomes mundane due to: office politics, a poor correlation between reward and performance, repetitive work, envy for those who make much more, and exogenous variables outside of your control.
Early retirement life is filled with more happiness due to having 100% autonomy. You’re spending time doing whatever makes you most happy because you can. As an entrepreneur, you’re happy because you have a lot more autonomy to do what you want. If you start feeling your business is losing purpose, you can always pivot.
The best combination really is to moonlight while having a day job. Second best is to do something entrepreneurial once you are able to retire. And if you can have a spouse earning a steady income while you go after your idea, well, all the more power to you!
I will say that after 13+-years of running Financial Samurai, I’m very happy because I have a purpose. In 2022, I’m publishing my first traditionally published book called, Buy This, Not That: How To Spend Your Way To Wealth And Freedom, which I think will be a big hit. And if it’s not, I’m thrilled to have created something of value to society and made my children proud.
Freedom Is Much Greater Than Money
I’m glad I spent 13 years in Corporate America. If I didn’t, I wouldn’t be able to truly appreciate how awesome it is to be my own boss. The difference is night and day. And that’s coming from someone who enjoyed his job ~70% of the time and made a very handsome salary.
Progress is my one word definition of happiness. When you own your own business, there’s an endless amount of progress to be made!
I really can’t believe it’s been over 11 years since I started Financial Samurai. This site has enabled my wife and I do be stay-at-home parents to our two young children. Every day there’s something interesting to read from a user comment.
Finally, given we’re in a global pandemic, it’s a blessing to be able to operate an online business that cannot be shut down. Everybody should be figuring out a way to make money from home, even if you don’t retire early.
Starting an online business, no matter how small, could be the best thing you ever do.
Interested in starting your own website?
Check out my step-by-step tutorial guide on how you can launch a site like mine in under 30 minutes for just $2.95/month. A website legitimizes your business and becomes your online portal.
Not a day goes by where I’m not thankful for starting Financial Samurai in 2009. In just 2.7 years, I was able to quit my job and be free. Everyone should leverage the internet to build a brand, build a business, and become untethered from an office to live a life of purpose!
Hi Sam – love the consistent thought-provoking content you provide. I’m going to comment from the perspective of someone who knows a lot of people (ex-tech) who are financially independent, and for whom it doesn’t work out so well.
I think there’s a lot of people now working towards financial independence/early retirement that write prolifically about it, and earn money on their writings. Not slamming you, Sam – I love your writing and your positivity. And I don’t think that NOT being financially independent is so great. But anyway – the best way to promote these writings is to consistently project a positive image of fi/re. So a lot of the more negative aspects are ignored.
Another reason why the downsides of fi/re are ignored is that you’ll consistently get one of 2 responses to people who comment on them (on forums, blog comments, etc):
1. “I’d like to have those first-world problems”/”I’m playing the world’s tiniest violin for you”
2. “If you’re bored in fi/re, you must be boring. I have a list of projects as long as my arm that I’d love to work on if I ever had the opportunity.”
One negative thing is that what people are not compelled to do, they frequently don’t do, even if over the long term it would be better for them. For instance, most people are better off getting out of the house every morning (work, school, gym, whatever) and interacting with people, rather than staying at home. But a LOT of people who aren’t forced to get out because of a job or school will actually tend towards staying home, and being hermits. Sure, there’s plenty of counter-examples, but from what I’ve seen of life, this is the tendency.
Related to the above – it’s tough finding the structure that’s not a job or school, and that gets you regularly out of the house, and seeing people every day. Most people would say – do some volunteering. That might work for some people. Don’t just assume that it will, though, without having spent significant time at some non-profits. In my experience, they’re not necessarily better than regular jobs. Lots less efficiency, lots of little fiefdoms. I do know two fi/re people who work one day a week at a hospital gift store, they enjoy it. I also know one lady who started out volunteering at a very well-run senior center, and is now a part-time bookkeeper there, and absolutely loves it. So, it can work. It’s just lots harder than you might think.
Also, once you’re financially independent and don’t *need* to work, every potential new job is evaluated against the impossible standard of complete freedom. This makes it much harder to accept the inevitable negatives that any job will have. It’s much easier to quit the job, or not even start, because it doesn’t give you time to do (insert here something you probably wouldn’t do anyway – working at the homeless shelter, become an artist, etc.)
People that are fi/re are kind of like trust fund babies. Trust fund babies also don’t need to work, and many proceed to mess up their lives. And the main thing that messes up their lives is that they are not compelled to do something – i.e. work. You can say – and I think it’s partially true – that trust fund babies and people who retired early after working hard in a career or business are completely different. I’d say – yes, they’re different, and the early-retirees that I know aren’t ruining their lives with drugs. It’s more that they have empty lives, without interacting with many people, without contributing to the world.
Sam, if you’re interested in article ideas, I’d love to hear more about people who no longer need to work, but still do. Or even if they don’t work, they manage to stay engaged, and productive, and specifically how they do that. How they find an in-person social network, etc.
Hi S,
You will enjoy these posts:
The Dark Side To Early Retirement
It’s Impossible To Stay Retired Once You’ve Retired Early
Life After Financial Independence
I’ve got so much content reflecting on my FIRE journey that’s real and real-time. I’m a little different in that I aggressively built my passive income portfolio and then negotiated a severance that is still paying out until 2017. A lot of folks write about FIRE and make a lot of their income writing about FIRE. That’s fine with me as that income often makes up the “gap” of existing income and needed retirement income.
But now that I’m almost 5 years into FIRE, I’ve somehow created a lot of online income writing about my journey. Very surprising, but just goes to show you never know if you stick with things long enough and build a brand online! So much fun writing and connecting. I think blogging is the perfect activity in retirement!
Sam
I am a big supporter of starting a side business while still working full time. Sure in a perfect world we could quit our jobs right away, start our business and see instant success. But the reality is that it often takes a few years for a business to become profitable… let alone enough to completely support you.
A website is a great idea. Another one is a Youtube or Instagram account. My brother has an Instagram page that just recently broke 1 million followers. He started the page about 3 years ago, and so far this year he has made over $70,000 from selling tee shirts (through a drop ship style company) and selling advertising on his page… All of this he does from his iPhone. All in all he probably spends about 2 hours per day working on his business. There is no reason someone could not do this while still working a full time job… at least until the business reaches your income goal.
Wow, 1M followers on Instagram? Amazing. What does your brother do?
You remind me I need to put a cool widget button on the site for people to buy a newly redesigned Financial Samurai shirt. It is so cool, you’ll have to see it!