Yesterday marked the 14-month anniversary of the day I was given my walking papers. Since then, I’ve been busy creating the Early Exit Academy and surviving without an income. But astonishingly, I still have a healthy balance in my investment accounts. And while I would love to claim that I’m a savvy investor, the truth is, LUCK– and my tendency to take some risks – were on my side. Honestly, I am astonished that I have as much money left as I do. But the well will run dry if my business doesn’t turn around soon.
Before I share the numbers, here are my financial priorities.
As 2018 began, I set a goal to build my non-retirement savings and investments up to $100,000. I was burning out on the job and wondered how much longer I could keep up the crazy work pace. Ironically, I reached the six-figure mark thanks to my accumulated leave payout! Since then, the only notable addition to my savings account was from an income tax refund. To date, I’ve invested almost $38,000 in my business – primarily to create the Early Exit Academy. Here are the details.
In the first five months of 2019, I averaged about $2,500 per month in living expenses. That includes some big-ticket items like property taxes and mulch for the gardens. Thankfully, I paid off my mortgage years ago so I don’t have that burden. Plus, the cost of health insurance in 2019 plummeted thanks to my lack of income. If I use a conservative estimate of $2,500 per month in living expenses, that means I spent at least $35,658 over the last 14 months.
Here’s the thing. I don’t have very much money sitting in a low-interest savings account. Instead, most of my taxable funds remain in two funds: Betterment (my refer a friend link) and a health care REIT – Welltower (WELL). I made my first investment in WELL in 2007 through a dividend reinvestment program (DRiP) and it has done well. Under this plan, dividends are automatically reinvested. In addition to benefiting from a high dividend yield, the share price for WELL has climbed during my no-income period (from $52.63 to $82.38). And Betterment hasn’t been a slouch either. I’ve been lucky!
If I had put all my money into a savings account, I would expect to have about $35,000 remaining. But thanks to the performance of my investments, I have $58,677 remaining in my taxable accounts. That’s a substantial difference that buys me more time to see a return on my business investment. But what would have happened had the market tanked? And what happens if a recession is right around the corner? Should I be more conservative, especially since the fate of my business venture is unknown?
The timing of your exit from the workforce – whether it’s forced or voluntary – is critical. If you lose your job in a “down” economy, finding a replacement position at a similar salary may be nearly impossible. And if the value of your main asset – your house – also crashes, it’s a double whammy. The joke about the Great Recession of 2007 – 2009 was that it turned people’s 401(k) into a 201(k). Ideally, you’d like to leave when the going is good. But that’s not always in your hands.
Many have tried to time the market, and failed. We don’t know when the next recession will hit and how long it will last. So common advice tells us to make investment choices based on our timeline. Keep at least 6 months of expenses holed up in a savings account. It won’t earn much in interest, but it will be accessible and dependable. If you don’t need the money for at least 5 years, let it ride in the stock market. It’s great advice, but I haven’t been following it!
It turns out, I am experiencing a psychological battle over withdrawing funds from my investment accounts. I held off selling WELL shares until last month, preferring to pull from Betterment. I could sell the entire portfolio and let it sit in my savings account. But that feels like failure to me. Here’s the goofy logic. Selling my shares and moving the money into savings is a signal that I don’t believe in my business. It means I NEED that money in my account to pay for groceries and gas. BUT if I don’t sell the shares, it means I believe that next month will be the turning point. The Early Exit Academy will take off and I will be able to sustain myself from the business. Yes, I know I’m being driven by my emotions!
It’s time to pull out all the stops on my business. I’ve been working long hours creating a recorded webinar – 5 Steps to Financial Independence … even if you’re living paycheck to paycheck, buried in debt, and have nothing in savings. And I’ve had great fun creating a movie quiz.
I’m feeling optimistic. My subscriber list is growing and I’m offering more products so that people can peek inside the Academy courses. I’m blitzing Facebook with ads and I have a $200 discount that ends on July 4. I have poured my heart and soul into my courses – it’s just got to work out!
Dr. Brenda is a sociologist, educator, blogger, motivator, and financial coach. In addition to blogging at The Five Journeys, she writes 30-day challenges at BetterLifeChallenges.com. Her passion is guiding people on their journey to financial freedom through coaching at DrBrendaMoneyCoach and online courses at EarlyExitAcademy.com.