In March 2012, I shared my Exit Strategy from my corporate career and received quite a few interesting comments. Some readers thought that I wasn’t ready and some thought that it was a good plan. What I didn’t write was that I had already made up my mind to quit in 2012. I really needed to quit and take the next step in my life. I thought I’d try it out and see how it goes. If early retirement didn’t work out, I could always find another corporate job. Today we’ll do a post mortem on the exit strategy and see what went right and what went wrong since I left my corporate job in July, 2012.
Exit Strategy Recap
Here is a quick recap of my exit strategy. For the record, I will be 40 this year so I did quit before I turned 40.
- up to age 40 – Work and build up net worth as much as we can and live a somewhat frugal lifestyle.
- age 40 to 60’s – Execute my exit strategy and become a stay-at-home dad. I’ll explore part time self employment options and finds opportunities to generate some income. Mrs. RB40 will keep working for now. She likes her job and isn’t cut out to be a stay-at-home mom. She might explore other employment options if there is a good opportunity. Do not draw on retirement funds at this time. Putting off withdrawal is one of the keys to my exit strategy.
- age 60’s to 100 – Both retire at some point and start to draw on nest egg.
Cash Flow Goals
Target – less than $4,000/month. In 2012, we were able to keep our expenses below $3,500/month on average. For 2013, our expense has been creeping up and it’s right around $4,000. This is under control for now. I was afraid preschool would blow this out of the water, but we got kicked out of preschool so we don’t have to worry about it until next year. (Another story….)
Target - about $5,000/month. Let’s go over one thing at a time.
- Mrs. RB40’s income target – $2,900/month after taxes and 401k contribution. She got a little raise, but she also has more deductions now. We increased her 401(k) and shifted 50% to Roth 401(k.) She also added us on her health insurance plan and increased her life insurance policy. I think this year she’ll bring home around $2,600/month.
- Rental income target – $800/month. We didn’t do well at all with our rental income. For 2013, we are still near the breakeven point. I’ll give it a couple more years and see if this is something I should continue with. This was way below expectation.
- Dividend and interest income – $550/month. I was able to beef up our online income a little and we should be around $650/month for 2013. Dividend income exceeded expectation.
- P2P lending – $100/month. We are making about $75/month with P2P lending. It’s a bit below expectation, but it’s still much better than a saving account.
- Online Income – $200/month. I kept my expectation very low because blogging could be an uncertain income even at the best of times. I put in a lot of work over the last 18 months though, and the online income has stabilized. I can count on at least $1,000/month and generally make more than that in a typical month. This is way above what I ever imagined. Let’s call it $1,200 for now.
Current Monthly Income
- Mrs. RB40 – $2,600
- Rental Income – $0
- Dividend and interest – $650
- P2P lending – $75
- Online income – $1,200
Total – $4,525
My projection was $4,550/month so overall we are still pretty close to that.
Things didn’t go exactly as planned, but we are doing well overall. When you make a big move like quitting your job, you have to be flexible. If one thing doesn’t work out, then you gotta make do with something else. Have several backup plans if you can.
We did fine with our cash flow so we didn’t have to mess with our backup plans. Let’s quickly go over them anyway.
Cut back retirement saving –If we needed more cash, we could have reduced Mrs. RB40’s 401k contribution. We didn’t have to do that and even increased her 401(k) contribution and took advantage of the Roth 401(k.)
Cash Savings – We can draw from our $50,000 savings account. Now that it’s been over a year, I’m going to invest most of this backup cash. We haven’t needed it and I would like to earn more than 1%. I plan to keep about $20,000 in our saving account for emergencies.
Part time work – I can take up part time work if we really need some cash. Right now, blogging is basically my part time work. I spend about 20 hours/week on it and that’s quite a lot of time for a stay at home dad.
Quit or Get Laidoff – I quit because I couldn’t wait any longer. Recently, I heard from one of my old co-workers that the company offered a voluntary separation option about 8 months after I left. Doh! Perhaps I should have waited a bit longer and put Financial Samurai’s How to Engineer Your Layoff into action. The book was released just a few days after I quit though. If Sam had sent me an advance copy, I might have been able to add another $100,00 to our dividend portfolio… That’s counting 8 months pay and the severance package. That severance package was only offered to a few people anyway and with my luck, I probably wouldn’t have gotten it. I’m not crying over it though, because I’m quite happy where I am today.
*note* I’ve seen 4-5 of these voluntary separation programs in the 16 years I spent there and I didn’t qualify for any for them in the past.
Mrs. RB40 – Some readers warned of this, but I didn’t believe them. Mrs. RB40 had always like working and I thought she’d happily do so until she’s 60. Lately, she has seen how happy we are without work and she is longing to spend more time with us. It’s going to be tough if she quits her job too, but it’s not impossible. We’ll work on Mrs. RB40’s exit strategy next, so come back next week to visit us.
Do you have an exit strategy? You really should make a plan so you can work toward making it a reality. Don’t wait until you’re 60 to plan.
photo credit: flickr jeroen_bennink