Leaving a boring job to do your own thing is scary. There’s nowhere to hide when you’re responsible for everything. At the same time, there’s nothing more rewarding than creating something from nothing. No promotion or raise comes close.
Recently, a reader asked, “What do you think you’d be doing now if FS hadn’t worked out so well for you? Back to the IB grind, real estate tycoon, build a tennis school…other? Might be an interesting article unto itself, I know you’d get at least one interested reader.”
I haven’t thought about this situation since 2012, when I first left my day job. Further, I know that after writing, “Career Or Family: You Only Need To Sacrifice At Most 5 Years Of Your Life,” I definitely won’t be going back to work full-time until 2022, at the earliest.
But this is a good thought experiment to ponder because I’m sure many of you might be wondering what if you took the leap of faith and things don’t work out either.
A Time Limit On Your Crazy Idea
You’ve got about three years to gain traction in your business before society writes you off. Nobody will bat an eye if you disappear for one or two years because plenty of eager beavers go off to business school for two years and re-enter the workforce with no problem.
But after three years, people will start wondering what you were doing with all that time. They’ll start questioning your judgement. They’ll wonder whether you were too delusional or too stubborn to realize that your endeavor wasn’t working out. Once they think all these things, your chances of getting hired at a comparable job you left for comparable pay diminishes precipitously.
Two or three years is also a perfect amount of time for a rational entrepreneur to decide whether his or her product can generate a minimum livable income stream. During this time period, you can probably pivot one or two times as well.
If you aren’t generating a livable income stream after 36 months, or you haven’t raised capital from outside investors, then you should probably get a job.
My Entrepreneurial Time Limit Was Two Years
According to FINRA regulations, the Series 7 license expires after an employment lapse of two years. The test is six hours long and contains 260 questions and there was no way I was taking that puppy again if I decided to rejoin the financial services industry!
Therefore, I gave myself two years to see if I could generate momentum on Financial Samurai. I published three times a week and saw progress. During this two year period I hedged my bets by going on interviews with several financial firms, but I just didn’t feel the same excitement as I did in my 20s. Instead, my excitement was 100% targeted towards my online business.
It was a scary moment to let my Series 7 license expire in June 2014, but it also allowed me to burn my boat and never look back.
If you plan to take a leap of faith, check any license expirations and set a three year time limit, whichever comes first before you go back to work. To help your cause, consider freelancing in your old industry to stay relevant just in case.
Scenarios If Financial Samurai Failed
It’s pretty easy to see a scenario where Financial Samurai would have stayed stagnant or disappeared. I could have lost my motivation to publish consistently each week. Search engines like Google may have never decided to rank my content. And larger media publications may have never decided to highlight my work.
If I couldn’t gain momentum after two years, I would have done the following in order of likelihood:
1) Return to investment banking at age 37 (2014). Instead of working at a bulge bracket firm, I would have elected to work at a boutique bank with better hours and less stress. I would keep Financial Samurai as a secret side hustle and experiment with new content and partnerships.
There is also no chance I would have sold my Marina rental home in 2017 because I wouldn’t have bought another home in 2014. With a sluggish business and a new job, I wouldn’t have the confidence to get further into debt.
After three years of aggressively saving most of my salary and bonuses, I would reassess life and likely try to leave the business again at 40 (2017). With three more years of content, I’m confident Financial Samurai would have been able to generate a livable income stream by then.
2) Move to Honolulu and say to hell with it by age 38 (2015). My wife and I meticulously planned a simple lifestyle of living off ~$100,000 in Hawaii based on our passive income and online income at the time. We would have probably moved in with my parents for several months and then rented a decent two bedroom for $2,000 a month close by.
I would continue to write on Financial Samurai and probably focus more on lifestyle, travel, entrepreneurship and minimalism. We’d probably also do some online freelance work as well.
The amazing thing about Hawaii is that our favorite activities, going to the beach and hiking, are both free. It doesn’t cost much to live there once your housing costs are taken care of.
With no job and a lackluster lifestyle business, I would be highly tempted to sell my primary residence before moving to Hawaii. If I did, I probably would have given up $400,000 – $500,000 in gains.
3) Get a job at a financial technology company. The fintech space has gained tremendous momentum since 2012. I ended up consulting part-time with firms like Personal Capital and Motif Investing for two years. It was a lot of fun understanding the industry, meeting new people, and learning/advising a lot about online marketing. The only downside with fintech is its much lower base pay. We’re talking 40% less in salary than I used to make.
After at most four years of working in fintech, I’d want to leave and move to Hawaii. Four years is how long it takes for shares to vest at most startups. One of my goals at the fintech startup would be to learn about digital marketing to help build Financial Samurai further.
Finding Constant Themes
Going through this thought exercise, I realize that I would still publish on Financial Samurai no matter what. I’ve always used this site as a creative outlet. It’s the perfect thing to do for an early retiree who loves to travel or someone bored with his or her day job. Money is a byproduct of doing what I enjoy.
I’m pretty sure I would try and negotiate a severance at whatever job I was working at by the end of 2017 because I’ve always had a goal to leave work by 40. After all, I strongly believe it’s much better to retire by a certain age than by a certain financial figure. As a 40 year old now, I feel more strongly that the older you get, the more you cherish the remaining time you have left.
Trading time for money in your 20s and 30s is easy. But after 40, it starts feeling like a waste since you realize there are plenty of people who pass away in their 40s and 50s. Steve Jobs died at 56 for goodness sake, and he was the healthiest eater with the best healthcare money could by.
Maybe this whole exercise is pointless though, because I’ve always had confidence Financial Samurai would not fail. It costs less than $5,000 a year to keep the lights on. I knew if I could speak forever, I could write forever. The greatest thing about running an online business is that the harder you try, the better you’ll do. I’m not sure if that’s the case with other businesses.
If You Plan To Go Out On Your Own
There is no doubt that being an entrepreneur is stressful, especially if you have a family to raise. Here are some suggestions I have before you go out on your own:
1) Work on your business after hours while you still have a job. Unless you have a major amount of funding, please don’t leave your job to work on your business full-time without testing it out for at least a year. We all know that most businesses fail. Working from 5am – 7am or 9pm – midnight is plenty of time to see if your business can gain traction. I hired a guy from Craigslist to come over to my house and create a website after work in 2009. Nowadays, you can launch one on your own in thirty minutes with my step-by-step instructions.
2) Refinance or get a mortgage before you leave your day job. Once you lose your W2 income, you are deemed too risky for banks. Only after you have at least two years worth of 1099 (freelance) income will banks consider you a creditworthy candidate. Despite having a significant amount of assets, one of my refinance attempts got rejected in my early years post work. You may also consider taking out a line of credit, such as a HELOC. Checking out LendingTree to get a free online quote. They have one of the largest online lending marketplaces.
3) Leave your day job after you see hockey stick growth or operating profits. If you plan to run a lifestyle business, then it’s best your lifestyle business generates at least a minimal livable income stream before leaving. If you plan to grow a non-lifestyle business, then wait until you see explosive growth and a visible path to profitability before leaving.
4) Negotiate a severance. A severance will buy you months, if not years of runway to grow your business without overly worrying about profits. Once a business focuses too much on profits, the product or user experience generally declines, and so does the overall business. If you can’t negotiate a severance, then have at least one year’s worth of living expenses in the bank, preferably two.
5) Learn the pitfalls and build a network. Speak to as many people in your field of business as possible and learn how they got off the ground and thrived. Learn about their mistakes and figure out ways to help them so that they might one day help you. Listen to as many podcasts and read as many articles as possible about existing entrepreneurs.
6) If you have a spouse, talk things out thoroughly. Discuss your entire entrepreneurial plan with him or her. Having a spouse work a stable job with benefits while you go off and do your crazy thing is an excellent combination. Just make sure you have some revenue and time guidelines in order to not burn each other out.
The leap will be scary, but the regret of never leaping will eat you up inside if you have a good business idea. Limit your entrepreneurial endeavors to three years and you’ll likely be fine. After three years, all bets are off.
The one thing I recommend everyone must do is at least try and negotiate a severance. If you want to leave your job anyway, there is no downside in trying to negotiate a severance package. My severance package in 2012 provided me full living expenses through 2017 when my last deferred cash payment was paid. This 5-year runway allowed me to not worry about money and build Financial Samurai into what it is today. Check out my book, How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.
Well said. You’re in control of your destiny when you’re running your own show (business), and there’s no real ceiling.
This is a great, thoughtful approach to taking that leap toward entrepreneurship. The point about trading your time for money as you get older really resonates with me.
You also make an interesting point about how long to give yourself for an entrepreneurial endeavor. I think people generally seem to overestimate the risk of trying to start a business. It’s almost like when people imagine the possible outcomes, one outcome involves sitting on an island counting millions of dollars and the other leaves them destitute. Of course, the vast majority of entrepreneurs wind up somewhere in between this wide gap.
The reality is that even if you try to start a business and it fails after a year or 18 months, you can probably get back into doing something similar to what you were doing before, and your life will be that much richer for the experience. Personally, I think when I look back on my life some day, I would rather look back as someone that took a chance and failed than to be someone that never took the chance at all.
Thanks for this Sam! Just ran into your site via https://www.financialsamurai.com/the-proper-asset-allocation-of-stocks-and-bonds-by-age/
Have you written about the 4% rule? I feel like you might have strong opinions on it…
I don’t have your level of knowledge, but it seems to me that a 100% stocks (VTSAX) portfolio while working and a 75%/25% VTSAX/Total Bond Market portfolio once retired is a simple, low-maintenance method that gets good results.
What do you think?
Sure. Here are my thoughts on withdrawal: The Ideal Withdrawal Rate In Retirement Touches No Principal
Also: The Fear Of Running Out Of Money In Retirement Is Overblown
Since leaving the workforce in 2012, I have not withdrawn a penny of principal from my retirement funds. When you’ve spent a lifetime saving and investing, it’s impossible to start spending down your money.
Thanks FS.
I like your point about retiring happy and safe (I plan on living to 100+!! :) ). There’s no rush.
And that plus the overblown fear of running out of money makes me feel pretty confident that when I do manage my early retirement things will be just fine.
Every time I come here, I end up spending much more time than I meant to…lots of good stuff
I think that you are doing a really great job. I enjoy your blogs with all of their great bits of information. Please keep them coming with or without errors.
A topic dear to my heart! My husband is an entrepreneur and we live in the Bay area. I have a stable job and benefits to support us. We have a 3.5 yr old. We moved here for my husband to pursue his dream of running a startup (she sold startup#1 a month before the 2008 crash). it’s been 3.5 years and though he and his team have taken a modest salary (from angel investor money) it’s been a HUGE risk financially for us to do this. Thankfully he raised a seed round couple of months ago, so the runway has been extended half a year. We rent (and own a house in NC) and I really wish we had bought a place when it was in our range of affordability in 2015 (now we’re certainly out). Long story short, I wish we had done 1 and 3 you listed above. It would have mitigated the risk by a large extent. We do talk about the business (setting deadlines and timelines is something we do every few months after advice from a marriage therapist to mitigate stress!) but overall I think the perspective of a startup spouse is somewhat different from a founder. So yeah, we’ve certainly burned each other out but hopefully the worst is over!
Great post, Sam. I like that you kept the message grounded, and gave adequate exposure to the risks of the dreams not coming true also. As it goes, “it is better to have tried and failed, than not to have tried at all”. That was the basis on which I started my website, and while it’s a tiny fraction of your readership, has its own set of regular readers for whom my content “clicks”.
Very accurate list.
On your #2 item I would go a little further and suggest getting multiple unsecured Credit Lines and or a Home Equity LOC too. As you said it’s easy to get a loan with an income. It’s a lot harder as a start up.
That advice is also good for soon to be retirees.
When you started your blog in 2009, did you keep it secret from your employer? Was it easy? Any tips? Asking for a friend
Never, ever, ever tell your employer or anyone at work what you’re doing for yourself. You never know who will throw sand in your food (as my mother says).
A lady at work was leaving for another company. Long story short, corporate lawyers got involved and the other company rescinded their employment offer. She was then unemployed for several months until she managed to get another job.
Rule of corporate life, KEEP YOUR TRAP SHUT!
Such great advice! It’s really hard not to brag to your colleagues what you are working on. But it’s best to keep dreams to yourself until you gain some traction and know that you have a way out.
In my case, I disclosed to them about my plan before the site started and the plan got rejected. But I decided To start my own site anyway because that is my right after work hours. I can do whatever I want at home. Work cannot determine whether you have a Twitter account or a journal, so I forged ahead and never talked about my endeavors.
Hi Sam,
You are right to mention that it is better not to reveal the plan to others at all. One should continue to execute the plan remotely. If it is successful, it’s good. If it does not come to plan, it is perfectly alright as one will have gained valuable experience and decide on the next course of action.
WTK
Hi quantakiran,
I fully agree with your view.
WTK
Well now I’m glad I signed up with Bluhost for a 3 year domain. LOL. I bought that plan because it was the most economically sound one. Now it looks like it lines up perfect with your theory.
Well looks like 2021 will be when Xrayvsn will be faced with a decision. Actually even if it never becomes a financial juggernaut (odds are it won’t), the costs are very low for a business venture and it can just be stratified into hobbyist endeavors.
That’s the thing. When I first started out, it only cost about $300 a year to keep The site up. Because of the growth, I’ve had to get a private dedicated server and some firewall stuff which boosted the cost. But that’s OK because revenue also increased by a lot more.
Hi remember think to myself, if I could only make $1000 a month on my site, I’d be set is this income would nicely complement my other passive income.
You just never know. But with focus and consistency, good things happen. It’s much better than not trying at all.
That would be amazing if I get to the point where I would need a dedicated server.
Did you determine that point or did your hosting company suggest the transition? If you did, what was the criteria you used to pull the trigger?
I agree 100% that it better than not trying at all. I had created so many self imposed mental obstacles that delayed the start of my blog. People suggested I write a blog almost 2 yrs ago. Some self doubt included the fact that I felt there were already some physician fire/financial blogs out there that dominated the niche and that I knew nothing of starting a blog or creating a website. I also am afraid of the well running dry for ideas (luckily so far it hasn’t)
Glad I took the plunge. This is a great community to be a apart of and on a different level if you are a blogger then my past role as just reader/commentator
And on a side note. How in the heck do you write three articles a week? To get one with good content seems to take forever after my 10 million rewrites
I think it gets easier over time frankly. But then again, the first year was so exciting and fun I found it to be a pretty easy as well. So after about the third year, you’re writing kids quicker and you know stuff that clicks. A lot of times you just have to let imperfection go and press publish and correct it later.
Every time I changed jobs was a higher risk for me than most. I have a neurological disorder that I always tried to hide. It causes loss of control, dizziness etc. Interviews were difficult too because stress always brought on the attacks. But I did it anyway. I pushed myself forward. A new job meant I had to prove myself all over again, and work twice as hard because of the disability. Every change in job was a huge leap of faith for me.
Right on! Great job managing your neurological disorder and overcoming each time.
It’s so intriguing to think about different scenarios like this. Some things could be so different and others would likely have turned out similar or the same. Of your three alternate scenarios I could picture number 2 or 3. I’m glad things have worked out so well for you that have your current experience though. Really good list of six tips! I can vouch for the benefits of negotiating a severance! Your book and advice changed my life!!
Nice list!! And the answer is yes, I do plan on going out on my own! I started in January this year and going to give it 2 years part time, then quit my day job in 2020! My husband is on board. Of course, now I am working extremely hard, both at my day job and on my part time business.
Best of luck on your journey! Since you have a two-year plan and a spouse, I think things are gonna work out fine. You will naturally just work harder and find ways to earn a living once you’re on your own.
I think it is such a personal decision that your list of things to consider could go on and on. Build a Financial safety net, assess ability to reduce expenses dramatically if things turn sour, build a return to workforce plan, assess ability of your family, friends, others to support you if things go down, make sure your mariage is strong enough to support downside stress, etc, etc. These are the négatives, but you also have to understand the scalability and positive side. All very complicated but I think you have laid out a good start.
Fascinating, so if Financial Samurai didn’t work out then Financial Samurai would have worked out.
Such amazing confidence, I know you recommend starting your own blog but it’d probably be best to pivot into something that doesn’t compete with that. At least that’s my take away.
Best wishes.
You have to have supreme confidence if you plan to go out on your own. Otherwise, you never will. It’s kind of a catch 22.
I think having the safety net of passive income helps a ton. Even if FS didn’t take off, you’d still be fine. You have enough passive income to enjoy life in Hawaii even without the online income.
Out of all the steps you list below, working with your partner as a team is the most important one if you’re married. You need to have the same goals and work on it as a team.
If Retire by 40 didn’t work out as well as it did, I’d probably focus on keeping our cost of living low first and perhaps work part-time after our son started school. It’s a bit too late to go back to engineering now. My knowledge is outdated already.
“The greatest thing about running an online business is that the harder you try, the better you’ll do. I’m not sure if that’s the case with other businesses.”
I find this to be very true too. There are some bloggers that are amazingly smart but they don’t have content to reflect it. The only reason is because they don’t try hard enough. That’s it! Dedication goes so far online.
“If you have a spouse, discuss your entire entrepreneurial plan with him or her.”
For us…it was more like a fight but still important to discuss it :) My plans included 3 years and then another 5 years for other online projects. I like the work because I like what I do but my husband is unhappy with the decreased amount of attention and quality time we spend together. Talk about burning each other out…
Trading time for money in your 20s and 30s is easy. But after 40, it starts feeling like a waste since you realize there are plenty of people who pass away in their 40s and 50s.
Well said! That’s why when I realized I was financially independent in my mid-40’s I started thinking “what am I doing with my life, here in this office?” I think your 40’s are the decade when the time/money equation starts to get scrutinized more. To quote a song, when you realize there are “less days in front of the horse than ridin’ in the back of the cart”, it triggers your mind to explore all kinds of things you never considered. That’s what happened to me at least.
And I never thought I see you mention the possibility of minimalism. That one took me by surprise ;)
I feel number 8 before you start a business could be to have enough in passive income to cover expenses – that way you can grow a business the way it is meant to grow without worrying about short term goals such as a paycheck.