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. As long as you have some investments in the background providing income on the side and growing in value, you’ll feel plenty secure.
By the way, you can keep tabs on your annual dividend income using the spreadsheet I created. I’ve used it for years as a way to help plan my finances and watch my progress. Get it below.
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.
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What about for the ATO – what are some acceptable occupation classifications such FIREys could assign to themselves? Keep up your great posts & podcasts ????
Hey Michael. I feel like I might’ve answered this question for you before. But I’m not sure I get it – what’s the issue with ATO? You’re living off investment income, you can simply put retired, or not working or something. I’ve never run into any problem here filling out tax returns – there’s no reason for there to be an issue.
Thanks Dave -you have a better memory than I do! I searched my emails & you sent to me: -“Tax return you don’t need to put ‘occupation’ because there’s no more PAYG section details to fill out.” The last tax return my accountant prepared had my current salaried occupation in there (an option from a list of possibilities the ATO maintains). I’ll check the next one to see if that’s dissapeared. My interest in this that I suspect the ATO would compare your claim against the population within your category – & if you are an outlier, may launch an audit. e.g. if you’re a Public Servant (i.e. where everything’s supplied for you) & your’re claiming duductions in the thousands for office supplies, it looks sus & would warrant investigation. I’m not suggesting anything nefarious – just looking to avoid unnecessary audits by nominating the wrong occupation code for a FIREy.
Well I do my own taxes and don’t remember even entering an occupation – the system asks if I earned any employment income and I simply click ‘No’. End of story. So there is no ‘wrong’ occupation code, there is simply nothing to fill out in that section. Your tax guy will obviously sort you out in that area.
The ATO is free to ask for more information at any time, but there would be no reason to fear an audit. All investment income is declared, all taxes owing paid. Majority of the time they’re looking for people who have large amounts of deductions or large refunds owing or scraping data to see if what you’re telling them lines up with what lines up from the automated collection sources.
Thanks Dave – I’m looking forward to the day I can click “No” to “earned any employment income” 🙂
It can be such a hard process mentally to leave the stability of a job or career.
I’m no where close to FI just yet but am not entirely happy in my career. It’s super stable with good allowances, impossible to get fired from and allows me a 30-35% savings rate. But backing myself that I am capable of that move (to another job) is really hard, especially with no formal qualifications for idea of what I actually want to do. The struggle is real!
Thanks for the comment Nicole. Haha ‘impossible to get fired’ 🙂
Again, this is mostly imagined hurdles than reality. If you have skills, are actually good at your job, there’s no reason you wouldn’t be capable of moving. Run over your skills in your mind, or on paper, look at the work you’ve done over the years, the problems you’ve solved, what your strengths are, and convince yourself there’s value there. If you don’t believe it, others probably won’t either.
“impossible to get fired from” – we must be talking public service Nicole?! Been there done that before. Maybe think about a holiday around the World or a course of study to get you off it? Good luck.
Hi Dave,
Great Article, With my job when I hit my fire date. I will have heaps of unused leave and long service. If you have been with the same employer sometime. It is worth considering the value of these entitlements. With my situation this will form the funding of the cash buffer. This is much easier than working longer and saving for a cash buffer.
Thanks! Yes, that’s a great point. Definitely worth considering leave entitlements. I actually received a $10k payout myself. Also worth mentioning that most people have an ’emergency fund’ type of cash buffer anyway, so the extra saving isn’t likely to take very long at all in most cases.
Don’t forget cashing all that in may take you up a tax bracket 🙂 better to burn off towards the end than take a lump sum – or time you’re leaving date wisely so the cashing out of leave falls into a new tax year
Hi Dave, great article. Thank you.
As a recently “retired” 47 & 49-year-old couple, we feel very grateful every day for this enormous privilege we are able to enjoy. While my husband has almost no fear about our savings bucket, I have mild ruminating anxiety and often worry about our expenses and what the future might hold. Despite having a 2-year cash buffer and, according to the 4% rule, almost double our current annual expense budget, I regularly need to go back and revisit my forecasts to give me piece of mind. Your article has many great tips that I will also employ next time the worries start to creep in.
Thanks Nic, appreciate you sharing your experience. Oh my goodness, that’s an extremely strong position to be in, congratulations!
Everyone is different, so definitely sounds helpful for you to run over things to comfort yourself that everything is fine 🙂
I completely get where you’re coming from. It’s one thing to understand intellectually that the numbers support what you’re doing but when it’s your entire way of life at stake, it’s completely normal to second guess yourself and keep re-confirming that you’re ok.
I really enjoyed reading this post Dave, it came at just the right time for me! Keep up the good ‘work’!
Glad you liked it Julie, thanks!
Christmas 2023 I’ll be taking 7 months long service leave at half pay, then that’s it.
Mrs already retired last year on dividends (she’s a Thornhill style investor).
I’ll retire on draw-downs from my Vanguard fund.
768 days to go.
That’s awesome! Haha, not counting or anything…
Hi dave, Great read, wondering if you could expand on the 25x your annual expenses saved up in net investments comment. That is a very big number, do you know of some reading I can look at re this point?
Hi Gareth. This is the well documented 4% rule of thumb, that we can expect to produce a sustainable 4% per year from shares in retirement and keep up with inflation over time. $40k spending requires a $1m portfolio, and so on. We went into detail about this topic in a podcast you can find here – How Much Do You Need to Retire Early?
Thanks Dave, with the $40k are you counting on selling parts of your investment off to get to that figure? If you have a balanced portfolio of say 50% aus shares and 50% rest of world then dividends wouldn’t get you there alone I wouldnt think?
If that’s the portfolio, then yes, a small amount of harvesting gains from global shares will be required. Dividends on 50/50 Oz/Global would probably be about 3% so $30k. Given global shares have less income and higher growth, this is perfectly sustainable.
Thanks Dave for taking time to reply, love the blogs and podcast with Pat
Awesome article mate and very topical for me. I could actually quit and walk away right now with enough passive income to more than cover my expenses. This is actually tempting because I don’t like my job – “don’t like” is more accurate than “absolutely hate” hence it being tempting as opposed to a no brainer.
The thing that keeps me hanging in there is that I’ve been with the employer for 20 years and there might be a chance of a redundancy with a decent enough payout that would make my post-FIRE position even stronger. Whatever happens this will be my last job and because the impact of spinning my wheels on my career isn’t an issue, the prospect of a final big payday is influencing my actions.
The other option for me is negotiating a transition to part time (say 40%) which would just cover my expenses and so delay me having to tap into the passive income stream at all for now but still give me the big increase in uncommitted time that I’m looking for.
Cheers Steve.
I have to be honest here. If you already have more than enough wealth, then what’s the point of continuing to do something you don’t like for even more money? This is probably your mind hoping for this ‘free bonus money’ of severance pay, like a little lottery win or something. Even if you say you’re neutral about it “it’s an ok job” I still think it’s a wasted opportunity to continue doing something you aren’t really into for more dollars and something to do.
Up to you of course, but time is too precious to give it away for anything that doesn’t feel meaningful once we’ve got enough. I would think hard about those alternative options!
Steve, Why hang in on Just in Case…. I had a bad accident three years ago and could have died… Luckily i didn’t but it made me realise tomorrow may never come – make today your best day ever… I set myself the goal to semi retire in 3 years at 55 after that accident… Beat my goal by five months, work gave me a 50/50 job share now i get to enjoy my life and cover my bills with a job share salary…. Now i’ll just Coast to Fire and enjoy today. Dividends from investments pay for all the nice things
I am 60 years old and not looking at having 25x annual expenses as my number. I am trying to work out how much I should have in Super so that it lasts the 5 – 7 years before I can claim the aged pension at 67. I own my PPOR and have some money outside Super also. Is it simply a matter of multiplying the number of years before pension age by your annual expenses or should your Super balance be enough that you don’t need to rely on the Pension? I am trying to decide when to pull the pin. Thanks
Hi Anna. This question has many variables. Is the pension going to be enough? Are you hoping to do zero work until 67, or part time? Generally yes, you need to figure out how to finance those 5-7 years through a combo of part-time income, personal savings, super withdrawals, so that it lasts until the pension.
If the pension will be enough, then you can work less now, spend more of your savings/super and as long as you don’t run out by 67, you should be good. If it won’t be quite enough, you prob want to continue working a little bit, spend less of your personal savings/super. Hope that helps. As you can maybe tell, a lot of ways to do it depending on income/expenses/wealth/work appetite.
Thanks Dave. Yes quite a few variables to consider
you need to read Nick Bruinings book – Don’t Panic why you don’t need a million to retire
Hi, am I the only one in here that doesn’t have a heap of money stashed away?? I probably shouldn’t be here as it’s way too late for me. I am 70 next birthday, still working full-time. I know everyone will say “you must have been a really bad money manager to not be well set up by now!”. Criticise away, I’m used to it. I had typical female pattern – divorce, many years of single parenthood without any maintenance payments, part-time work, single parent pension, then years of FT work on low wages. I have used all my super to buy a very modest place so that I have somewhere secure to live. I want to pull the plug but it’s my security blanket; the thought of having to survive on pension alone is really scary. I am hoping to keep working 2 d/w to top up the pension. I have added up all my expenses and I would have to cut back a lot just to survive. “Survival” is not a very attractive prospect. The anxiety is real.
Hi Jean 🙂 This blog definitely has a skew towards savers and those who have been/are financially focused. But you certainly won’t get criticism here – we’re all trying to help those who are interested in making positive changes to live a better quality of life.
Yours sounds like a tough situation. Working while getting a pension is probably a pretty good way to go about it, to maximize the amount of free time you can have while still balancing your bills. There has to be certain things in your expenses which probably aren’t adding to your happiness that you could cutting/improving – almost everything can be optimised in some way. In fact, lowering your spending if possible while certainly aid the anxiety around this topic, since your needs are less, making life easier and finances less stressful.
Great article Dave. As I was reading I was saying to myself, yes I worry about this (and that one and that one).
I am getting closer to fire but unfortunately those property returns really get eaten up after expenses and mortgages (even with a healthy LVR).
I will certainly be reading more of your articles to see if we can expedite our road to freedom.
Thanks Paul. As long as you’re making progress that’s the main thing! Are you planning to transition to shares when you hit FI or soon after?
That’s the big debate currently Dave. Do we start selling property now to remove debt and get it into etf’s or do we wait until I stop work and sell down slowly to reduce CGT.
I was always big on property but now see how much rent we lose after all the expenses come out.
Also worth considering the mental aspect. If you sell multiple properties at once after retiring, you’ll have a huge amount of capital to put into shares, which can be a bit stressful, rather than doing it over time. That’s one of the reasons we’ve decided to sell down our properties slowly, rather than all at once.
I Like “Money Flamingo’s” idea of 12.5 x annual expenses. Earn enough to pay the necessary Bills and let the magic of Compound do its thing with your investments. With this is mind, 3 days a week Max to work is enough. Starting next year, we’ll see how this plan goes.
Keep up with the great topics 🙂
Tom
Yep it’s a good level. I use that level for semi-retirement, either that or a paid-off home. Perfect time to reconsider doing something else. Kind of all inter-related concepts I guess. Sounds like a fantastic plan Tom!
I had a lot of these questions and emailed Dave for his perspective in early 2021. Having now been retired for a year I can say that not only was having a bit of perspective incredibly helpful at the time, but the information in this article is spot on for someone struggling as I was to get the courage and retire early.
It’s still scary to cut yourself off from a PAYG salary but it is 100000% worth it. I turned 36 this year and still pinch myself (and my partner) that is is our life. Having something to occupy yourself helped, and one of the first things we did was develop a compounder app that mimicked our complicated spreadsheets to work out if we could retire. It was fun and we still use it to check our trajectory every now and then.
We have a mortgage still, but are also still earning enough from our investments to have a surplus each month after tax and expenses are paid. We’re spending less than we thought because we have time to do things slowly. If the maths works, and you’re confident in your calculations, just do it. Can 11/10 recommend retired life!
Great article, and great perspective Dave. Thanks 😊
Hey Mads. Thanks so much for this feedback, it’s always great to hear stories like this!
Nice work breaking out of those golden handcuffs, and continue enjoying you’re freedom! 😁