November 23, 2021
A few readers have wrote to me with concerns about the details and practical aspects of quitting their jobs.
There is a string of unanswered questions and thoughts swirling around in their minds. Things like:
— How do I set up my finances before leaving work?
— How do I tell my employer and keep a good relationship in case everything turns to shit?
— Should I keep working part-time just in case?
— What should I tell people?
— What happens if I still have debt?
— How can I convince myself to take the leap?
In many cases, despite being in a strong financial position, these questions create doubt as to whether we can safely step into freedom, or if it’s all too good to be true.
Lots of important things to discuss, so let’s get into it!
I really love trying to help people create more freedom in their lives through this blog and the podcast. So it bothers me when I hear of someone with enough money to break free and live an independent life, yet is too nervous to do it.
Our desire for certainty and safety can be a slippery slope. ‘One More Year Syndrome’ is where the prospective early retiree keeps working, year after year, in an effort to attain more and more security. “Once I reach this next goal, then that’s it.”
They build more wealth, but the fear never goes away. So they set a new goal, then another. The golden handcuffs of full-time employment are shiny and familiar, yet also tight and restrictive. We’ve worn them so long, it’s hard to imagine life unshackled.
All I can see is an opportunity passing by. To live a more meaningful existence, spending precious time doing all sorts of healthy, happy things – whatever that is for each of us.
Change can be a little scary. But being trapped by nagging fears and worries is far scarier. I hope this post helps anyone who needs some positive affirmation and encouragement to follow their FI plan through to the end… because the end is the best bit – complete freedom – your reward for all this hard work!
First, determine your finances are ready to rock n roll. Do you have 25x your annual expenses saved up in net investments which can produce income for you?
I would also recommend keeping a cash cushion of maybe 12 months expenses. While not technically optimal, most people simply feel better with some cash reserves, and given we’re looking at a large life change, being psychologically comfortable is incredibly important.
This reminds you that the next 12 months are completely covered by savings – you don’t even have to touch your investments if you don’t want to. In reality, you’ll be receiving dividends throughout the year too.
If you’ve determined that the money side is good to go, then it’s simply a case of letting your work know you’ll be leaving, giving as much notice as you feel is suitable.
If going from 100 to 0 work is too big a leap (which I can totally see why it might be!), then feel free to take a steadier approach.
Here’s a few ideas…
Take more days off on a regular basis to see how you enjoy the increased level of free time. A few days here, maybe a week or two there. You could even get brave and apply for 3, 6, 12 months off without pay, which lets you test the water without actually leaving your employer.
Next, you can also opt to shift into a part-time role or dropping down from 5 days to 3 days, for example. You can continue reducing hours over time as you feel more confident with your finances and life in general.
Semi retirement will prove a beautiful lifestyle change and you might find it satisfies your itch for more freedom.
Are you worried you’ll quit your job, your investments will turn to shit and then you’ll somehow need your old job back?
In truth, as long as you remain a good worker till the end, your employer relationship should remain intact if you ever need it. Then again, even if your investments do terribly, there’ll still be no need for a full-time job.
If you want to be extra-accommodating to your workplace, you could ask if there’s anything helpful you could do on the way out. Maybe it’s training someone new, or leaving at a certain time of year, or after a particular piece of work is completed.
Honestly, the real trick is having the confidence to go through with it. Knowing within yourself that you’ll be okay whatever happens because you can simply adapt and adjust your plans accordingly.
You have a few options. Personally, I just told people the real story at the end. A few already knew what I was doing, but most didn’t.
I’m sure they thought it was strange and many probably thought I was full of shit. But it wasn’t a problem, and management left me with: “if you want to come back, you’re welcome to.”
So, the real decision is whether to make up a story or just have those potentially awkward conversations. Neither of which is a big deal in the grand scheme. After all, what can your workplace do or say that would be a problem?
Some ideas on what to say…
— You’re taking a long break and will live off savings.
— Say you’re just having some time off before eventually starting something new.
— Tell the truth, that you have enough savings/investments to support you and don’t need to work.
At this point, there’s no need to feel guilty about anything! You’ve earned the right to do whatever the hell you like. Taking time off and going into cruise mode for a while is just one example.
The pinnacle of awkward conversations. You’ll probably test a few different answers to see what works for you. Lately, I’ve been getting away with saying “Oh, I just do some writing part-time.”
Initially, you’ll be fine with “I’m taking some time off at the moment.” Then later, once you get around to starting some new activities, you can use my approach, “I just do X part time.”
And if they ask how you manage that, you can simply say, “we have some savings/investments and don’t spend much, so we manage okay without working full-time.”
This avoids sounding like you’re saying “I’m rich,” which unfortunately is what people might interpret if you declare your financial independence. This way, they’re more likely to think you’re just a regular person with some savings.
If you’re feeling energetic, you can obviously open up a can of worms and explain the whole situation!
Regardless, some people will still think certain things about you for being different. In that case, let them be the ones who feel uncomfortable.
From a reader:
“So I’ve pretty much hit FI but I’m struggling to quit my job. Did this happen to you? I think it’s a struggle for me because I still owe $800k”
Great news: You don’t need to be debt-free to be financially independent! This is an outdated assumption which misses the bigger picture.
For the record, we managed to leave work while still owing a few million
If the numbers work, then they work. If you can access enough cash on an ongoing basis to pay your bills, that’s all that matters.
Worrying about debt is another way our mind plays tricks on us. But the real reason people get into trouble with debt is because they don’t have enough income to keep up the repayments while running out of cash.
Debt itself is not a problem, it’s simply another expense to manage. But you could also optimise your debt costs before you leave work by either refinancing to a longer loan term to reduce your repayments, or nail down the best damn interest rate possible.
After leaving work, you won’t have the flexibility or negotiating power to switch lenders, so it’s best you do this beforehand. More on mortgage strategies here.
Pulling the plug on your job can be made easier by reminding yourself of the strong position you’re in, and the different ways you can cope with any bumps in the road. You can…
Take comfort in the numbers. You have enough investments to sustain yourself using the 4% rule, which already factors in a bunch of conservative stuff like huge market corrections and increasing your spending every single year no matter what.
Remember your ability to be an adaptable human being. Whatever happens, you can use your knowledge, skills, energy and flexibility to find solutions to problems and figure out how to comfortably jump over any hurdles which pop up.
Think of how you could spend less if you needed to. Run over your annual expenses and consider all the different ways you could optimize these if the situation called for it. There’s probably more than you think!
Think of all the ways you can earn more if you needed to. Write down a few income-producing ideas which would help you turn on a stream of cashflow for a period of time. Part-time income, consulting/freelance, renting out a room in your house, and so on.
Calculate the benefits of the above options. I bet you’ll be surprised at how much flexibility you have to scale up income and scale down costs if you needed to.
As an example, maybe you can turn on the income-tap to the tune of $15,000 per year, while simultaneously reducing your expenses by $5,000. That’s a healthy $20,000 per year which would cover a huge gap in investment income.
Whenever you’re feeling anxious, pull out this Anti-Anxiety list. Have a read of all the levers you can pull to improve your situation and realize you’ll be completely fine.
More on how to prepare for early retirement in this post.
Probably nothing. Seriously!
I think it’s worth taking a good chunk of time to simply slow down and decompress for a while. You’ve probably been working pretty much non-stop for 10, 20, or 30 years. And before that you were at school for like 15 years.
When did you ever experience true freedom, where nothing is required of you? Basically never.
So take some time to simply chill out. Think about your life and your little place in the world. Appreciate the space to just do nothing. After a while, you’ll feel incredibly refreshed and you’ll be ready to find new things to do.
I feel like there’s far too much emphasis on keeping busy. Why are we so afraid to be idle, by ourselves, with our own thoughts, even for just a few minutes? What the hell are we running from?
Take advantage of this freedom to re-discover who you are and what’s important to you. Almost nobody else has this opportunity, so don’t feel pressured to waste this chance by burning time doing stuff to feel busy and in sync with society.
I had a few realizations in my first year off work, which you can read about here.
I never thought to write about these issues before because I simply didn’t worry about them myself. But feedback has shown that I’m the odd one out and this is a topic which deserves a lot of discussion!
As usual, so much of this comes back to our mindset. What’s going on upstairs affects us more than what’s going on out there.
To stay at work out of fear would be such a sad outcome for all that hard work. You built this wealth for a reason. It’s time to make the most of it.
The overwhelming message I want to leave you with is this: Remember what an incredible opportunity financial independence is. Almost nobody else on the planet has ever had this level of freedom open to them.
Give yourself the ultimate nudge to pull the plug by thinking about how amazingly fortunate you are that this is even possible.
It’s right there being handed to you. You simply have to let yourself embrace it.
Recommendation: If you’d like help optimising your debt before leaving work, feel free to check out my personal mortgage broker – More Than Mortgages. They can work with you from anywhere in Oz and also help with refinancing, debt recycling, investment loans, etc.
Note – if you end up getting a loan through MTM, this blog will earn a small referral fee. I only ever recommend things I use myself and genuinely approve of.