On April 1, 2014 I quit my job at Apple after spending nearly a decade with the company. I was ready for a change in lifestyle, to be master of my own destiny, to start anew. I was leaving retail behind forever. I was free.
It lasted 6 months.
To be fair, it was a critical 6 months. I co-founded my company not long after leaving Apple. I built a routine of regular exercise that saw me shed nearly 20 pounds over that summer. I also built a creative routine of writing in the mornings, and wrote two entire screenplays through a burst of creativity. However, it was not to last.
That September I was part-time job hunting again because my savings had depleted. The company I started with several others wasn’t getting work yet as we were still building the infrastructure. Bills still needed to be paid and money was low. As one last kick, my car died just after leaving my job and I had to get a new one, chewing immediately into my savings for a down payment. My wife and I set an agreement long ago that I do not have to work a daily grind job as long as my share of the bills are paid and I have medical coverage (more on joint finances in another post). I was running out of rope to meet my share of the bills, plus I didn’t have coverage those 6 months.
So why did my first go at early retirement fail miserably?
At the time, I still had my full load of debt. Looking back, it seemed asinine to try and quit my job with 4 credit card payments, a student loan payment, and a car loan (no mortgage at that time). Plus, usual bills of groceries, utilities, and rent. The debt payments totaled hundreds of dollars per month, just for minimum payments. The rate the debt payments chewed through my savings was unsustainable. I tried to go swimming with weights around my ankles.
Second was lack of income. Quitting your job doesn’t mean you don’t make money anymore. But when I quit in 2014, I had no real investment portfolio and I cashed out my 401k (it wasn’t very sizable) to start my company that May. The company was brand new and I had the time to put into it, but there was no revenue. And with four partners plus a company share, anything we made then was meagre. I didn’t have dividend-paying investments, side hustles, or freelance work to keep me afloat.
So I only spent. Every month the credit cards would take their bite. Unforeseen expenses would pop up — death by a thousand cuts. Still, I was happy. I was writing in the morning, then would go for a several mile run, spend time with my dog at the park, then make dinner to have it ready when my wife got home. It was a pleasant time, but short-lived. Reality bided its time, and when the savings was running out I had to re-enter the labor force.
So if you’re reading this with plans to quit your job as an employee, you must have a plan! Those 6 months taught me a few things. It’s dumb to build savings while you have high interest debt. I’m not saying you shouldn’t have some cash in the event of an emergency, but to spend time saving up 6 months’ worth of savings is a waste when your debt payments are just going to come for it anyway. Less monthly payments means less money needed every month. In 2014, I chewed through $7,500 in 6 months just in bill payments (that’s including rent, utilities, and groceries).
The second thing is you must have some sort of supplemental income to quit your job. There will always be some sort of bills (even if you own your home, you still have to pay property taxes), unforeseen expenses, and you want to be able to do something fun now and again. This means investment income, business income, passive income (rental properties or residuals), or freelance work.
Lastly, most startup businesses are done on the side at first. It’s great to be able to put all your time in on a new venture, but it takes time for a business to generate income. Sometimes it never does! When I got into the consulting game, the best advice I read came from someone who had been doing it for years. He recommended keeping a regular job for a year or more while doing consulting on the side. As he build his client base and reputation, the income started flowing. The best advice I could share is run your startup on the side, then quit your job when it gets in the way of your company. If business is good enough from the startup that it’s colliding with the day job, it’s time to move on from the day job!