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.