Author Topic: Should I take a year off?  (Read 8499 times)

PossiblyRare

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Should I take a year off?
« on: December 10, 2013, 05:51:16 PM »

Hello everyone, I've been reading these forums for awhile but this is my first post. I'm contemplating quitting work in a few months and taking a year off from corporate America. I live a mostly mustachian kind of life, except for a few glaring problems. I bought a house at near the bottom of the market in 2009, which is good, but I have a long commute. The commute is roughly 65 miles one-way, but I only drive or bike to the train station which is 4 miles away and take the train to work. My employer pays almost the entire cost of the train ticket, so the monetary cost of the commute is not much. Having said that, it takes 4 hours and 15 minutes out of my day, every day. When we bought the house, I said I'd do it for 5 years and then re-evaluate. The 5 years are almost up.

The other problem is that I'm not really super happy about the work I do. It is okay, but I have been with the same company for 10 years. I'm dreaming about being self-employed. If I stay at my job for another 10 years, I believe I will be able to retire (at the age of 47).

I started playing with the idea of quitting my job and taking a year off to try self employment. I currently make between $170k - $220k per year depending on bonuses and stock options. My wife makes another $35k per year. We have our costs under pretty good control. Our monthly expenses are roughly $3000 per month. We have no debt other than our mortgage. Assets currently look like this (they should be much higher I know):

House equity: ~$150k
Retirement investments: ~170k
Taxable investments: ~$42k
Savings account: ~$40k
(Cars: ~$25k)

The plan would be to live on her salary + roughly $1500 per month out of savings, which means we need roughly $18,000 per year to maintain current lifestyle. If I stay at work until April 2014 or so, I should have roughly $80k in savings, which is enough money to remain unemployed for 4.5 years, without touching any of my investments. If things go bad and my wife loses her job, it will be enough to last 2 years without touching investments.

I would take one year off, spend 8 hours per day building products (such as iPhone apps and websites), 2 hours per day exercising and 2 hours studying online courses (coursera etc). This means I would spend the same 12 hours per day doing activities, as I do today, except I would be working for myself and I would be taking care of myself rather than sitting on a train. It would also give me a taste of what early "retirement" would feel like. If after one year it turns out that I'm not able to make enough money through self employment or that I hate it, I would start looking for a job again. I hope that I will be able to find a new job within one year. So I would expect to burn through roughly $36,000 in the worst case scenario. If my wife loses her job, I'd start looking for employment right away (if nothing else because health insurance would be a major issue).

The biggest fears I have is that I'll never be able to find a job that pays quite as good again, and that I might end up working somewhere with an even worse commute. It would also set me back a few years to early retirement, I might have to work until 50 or longer if I cant find new job with similar pay. I also fear that being self-employed might be very lonely and that I will sort of lose touch with my network.

On the flip-side, if I do not do this, I will probably always wonder "what if". And I think the timing is about right No kids yet, and I think at age 38 I might have an easier time get re-employed than I would at 50 (at least in my particular field).

Any comments or thoughts? Face punches?








_JT

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Re: Should I take a year off?
« Reply #1 on: December 10, 2013, 07:32:42 PM »
Why not spend your next six months using your time on the train to build products, ramping up your side hustle to see if you like it/it scales before quitting your job?

secondcor521

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Re: Should I take a year off?
« Reply #2 on: December 10, 2013, 07:42:19 PM »
Is your wife on board?

Also, agree with the previous poster that all other things being equal, it's better to start the side job and have it crowd out the day gig than the cold turkey approach you want to do.

You're probably burned out.  See if you can switch jobs either within your company or at a new place.  Or go to grad school at night.  That kept me entertained for a few years.

Khan

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Re: Should I take a year off?
« Reply #3 on: December 10, 2013, 08:04:36 PM »
I have a question, what is your job that you're making 170k-220k a year at 37? And if it's not obvious, what was the training/school you went through to get there?

Much appreciated.

scrubbyfish

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Re: Should I take a year off?
« Reply #4 on: December 10, 2013, 08:23:00 PM »
YES!!! (To your original question.)

There's not much more for me to say than that; I just really believe this is an awesome thing (for most people) to do. Rest, play, invent, build, reevaluate, ponder, daydream. Yes!

If you have a plan for getting by financially, and a plan for re-entry if that proves necessary after the year, then why not? :)

brewer12345

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Re: Should I take a year off?
« Reply #5 on: December 10, 2013, 08:25:27 PM »
This all sounds so familiar.  I have done ugly, dirty, nasty, grueling commutes for way too much money and I did it for years.  It is draining and wearing.  I lasted for about 15 years before I was cracking and thankfully a door opened and I found a way out.  I was lucky in that by the time I bailed for less money and a better lifestyle I had accumulated a lot more money.

Without knowing what your profession is (tech?) its hard to say  whether you would be inflicting a mortal wound on your career.  I can easily understand the motivation to bail on the horrible commute.  However, if you are going to do this right, treat it like a business.  Before you seriously consider leaving for a year, treat it like a business proposition.  Put together a formal business case that puts your idea on paper and evaluates potential outcomes in a no-nonsense fashion.  This will help you figure out if your business idea is really viable, and if you have to go back to a day job you can use it to show that you were pursuing a serious business opportunity and not drying out, in prison, mentally of the deep end, etc.

It might also be worth evaluating your alternatives.  Can you move closer to work?  Find a telecommuting opportunity?

mgreczyn

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Re: Should I take a year off?
« Reply #6 on: December 10, 2013, 08:55:45 PM »
I'm about same age in a similar situation,  totally different industry. Before making any decisions you should head on over to financialsamurai.com and read his advice on how to engineer your layoff.  Much better financial outcome, plays well into taking a year off.

chasesfish

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Re: Should I take a year off
« Reply #7 on: December 11, 2013, 04:57:54 AM »
I'm curious about something:  What would it cost to rent a small place next to your office?  Why not sell the house, invest the equity, and rent someplace next to the office and recover the 4 hours of your life a day?  That frees up the time to exercise and build apps on the side while saving for a year or two.  You don't have to quit your job to do that stuff.

I personally don't think you have enough money yet and giving up that high paying of a job isn't a good idea yet, maybe a year or two away.

jrhampt

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Re: Should I take a year off?
« Reply #8 on: December 11, 2013, 05:51:29 AM »
I agree with others that your savings are low for your income and low for a foray into self-employment.  You're 37 now - what if you were to suck it up until you turned 40?  How much would your net worth be by then?  Could you get your investments/savings up over 500k (you should be able to do this easily)?  Could you finish paying off the mortgage (lowering fixed expenses even further)?

Spork

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Re: Should I take a year off?
« Reply #9 on: December 11, 2013, 08:55:15 AM »

I don't have a lot of advice, but I can tell you a little bit from my experience.  I did something very similar.  I wasn't making nearly your salary (but had a lot more savings -- I think I had about 10+ years of expenses socked away).  My plan was to quit and move.  I'd take 6 months off, then start looking for a job.  The results were that it took 3 years to find the job (and it paid about 60% of what I was making before the move).

That is said as a warning, but... for me it was absolutely the right move.  I got out of a work situation I was hating.  I moved closer to family.  While I make significantly less: I do not regret it one bit.  The 3 years off were fabulous.   But  it has also been a trade.  Had I stayed put, I would have been FIRE a few years ago.

Dicey

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Re: Should I take a year off
« Reply #10 on: December 11, 2013, 11:49:56 AM »
Why not sell the house, invest the equity, and rent someplace next to the office and recover the 4 hours of your life a day? 

I personally don't think you have enough money yet and giving up that high paying of a job isn't a good idea yet, maybe a year or two away.

I agree with CF on this...It seems to me that you are bored with the job and tired of the commute. So why not kill the commute and find ways to make the job and your newfound free time more interesting?

I always wanted to do what you are considering, but I hung in there and retired early. I am ridiculously glad it worked out this way, because now I never have to worry about going back to work to pay the bills.

Think of it this way: working another 10 will get you out of the rat race about 20 years early, at your current rate of savings. If you apply the principles of Mustachianism, you can do it even faster and then be free forever. At this point in your career, it is only incremental pain. If you really get motivated, you could do it in four years and then do what you want for the rest of your life.

PossiblyRare

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Re: Should I take a year off?
« Reply #11 on: December 11, 2013, 12:10:49 PM »
Why not spend your next six months using your time on the train to build products, ramping up your side hustle to see if you like it/it scales before quitting your job?

This is what I've been doing for the last year or so. I spend my time on the train writing iPhone apps, that I give away for free on the App Store. I get a lot of enjoyment out of writing iPhone apps (but clearly I have no idea how to monetize). The problem is that the economy in this area has been picking up significantly the last year, and the real estate market where I live is on fire, so more and more people move out here, making the train so crowded that it is often not possible to work anymore (or even find somewhere to sit) which contributes to my frustration. In a way you could argue that because I'm writing iPhone apps on the train, I realize how much fun I could have had if I did not stay at my current job.  I wish I could do this all the time rather than just on the train.



PossiblyRare

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Re: Should I take a year off?
« Reply #12 on: December 11, 2013, 12:31:05 PM »
I have a question, what is your job that you're making 170k-220k a year at 37? And if it's not obvious, what was the training/school you went through to get there?

I work in tech. I grew up in a country with free education, so I never had to go into debt for anything. More importantly, it is what I love doing, and I have been programming computers since I was 8 years old.










C. K.

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Re: Should I take a year off?
« Reply #13 on: December 11, 2013, 12:38:22 PM »
Changing Course with Valerie Young has been helpful so far: http://changingcourse.com/about-valerie-young/

ShortInSeattle

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Re: Should I take a year off?
« Reply #14 on: December 11, 2013, 01:10:56 PM »
I can relate. DH and I are tired and want a break, but we have pretty great jobs with a high income.

I don't have any hard data for you but we decided to stick it out until we are FI.

Mainly because there is no guarantee of replacing an excellent income. Better to gut it out for a few more years and bank a huge amount of savings than to take a break, go back in earning much less money, then have to work for a very long time.

Scenario 1: Stay. Add 100k per year to savings.
Scenario 2: Take a break. Come back at lower pay. Add 25k per year to savings.

If it is true that it would be hard to get your income back (and for us, we decided it was true) we figure one year of sticking it out will save us 2-5 years of work under scenario 2.

So that is how we sliced and diced it.

jrhampt

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Re: Should I take a year off?
« Reply #15 on: December 11, 2013, 01:23:35 PM »
I can relate. DH and I are tired and want a break, but we have pretty great jobs with a high income.

I don't have any hard data for you but we decided to stick it out until we are FI.

Mainly because there is no guarantee of replacing an excellent income. Better to gut it out for a few more years and bank a huge amount of savings than to take a break, go back in earning much less money, then have to work for a very long time.

Scenario 1: Stay. Add 100k per year to savings.
Scenario 2: Take a break. Come back at lower pay. Add 25k per year to savings.

If it is true that it would be hard to get your income back (and for us, we decided it was true) we figure one year of sticking it out will save us 2-5 years of work under scenario 2.

So that is how we sliced and diced it.

This is our situation also, and we've decided on the same approach (3 more years of sticking it out).

lifejoy

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Re: Should I take a year off?
« Reply #16 on: December 11, 2013, 01:34:03 PM »
I'm early in my career, so perhaps you should defer to the more experienced commentors. However, this is my two cents:

DO IT! If you are disciplined enough, you can spend 6 months to a year showing the world what a self-starter you are! I think it could be very valuable in an interview to say, hey, I worked on some stuff 8 hours a day and look at all the stuff I made! Look at what I have to show for it! It also shows passion for that kind of work.

Also, my dad retired early after he learned a lesson from his boss. His boss was a great man who was doing the work of two people. Sadly, he died of a heart attack. My dad quickly reassessed his own goals in life, and decided his job wasn't worth his life. Work is important, but life is about living! Savings will happen, money will happen. But living only happens when you make choices to allow for it.

Would you consider living JUST off of your wife's salary? That way you won't have to dip into savings, and it would be an awesome challenge! With you working from home, you might be able to bring down grocery and maintenance costs.

Best of luck to you :)

CommonCents

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Re: Should I take a year off?
« Reply #17 on: December 11, 2013, 02:55:46 PM »
Why not spend your next six months using your time on the train to build products, ramping up your side hustle to see if you like it/it scales before quitting your job?

This is what I've been doing for the last year or so. I spend my time on the train writing iPhone apps, that I give away for free on the App Store. I get a lot of enjoyment out of writing iPhone apps (but clearly I have no idea how to monetize). The problem is that the economy in this area has been picking up significantly the last year, and the real estate market where I live is on fire, so more and more people move out here, making the train so crowded that it is often not possible to work anymore (or even find somewhere to sit) which contributes to my frustration. In a way you could argue that because I'm writing iPhone apps on the train, I realize how much fun I could have had if I did not stay at my current job.  I wish I could do this all the time rather than just on the train.

I echo to test the waters.  Sell the next app.  See how it does.  Then make a decision.

Would your employer let you work from home one day a week (e.g. Wednesdays)?

dragoncar

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Re: Should I take a year off?
« Reply #18 on: December 11, 2013, 03:09:57 PM »
I agree with others that your savings are low for your income and low for a foray into self-employment.  You're 37 now - what if you were to suck it up until you turned 40?  How much would your net worth be by then?  Could you get your investments/savings up over 500k (you should be able to do this easily)?  Could you finish paying off the mortgage (lowering fixed expenses even further)?

Agree.  You have a great salary, but you are honestly behind the curve on retirement assets.  Especially on this forum.  You could easily be FI within a few years if you can attain a high savings rate.

If you had taken a last year off, I'm sure you'd have no trouble landing another job RIGHT NOW.  The problem is that the future is unpredictable, and we may very well be due for another tech bust any day.  If it happens when you are away, it might be that much harder to get back into the game.

Thus, I agree with others -- use the train time for side projects.  Or use it for real work and use your lunch break to exercise or work in some desk exercises or whatever. 

The above ideas about negotiating a work-from-home situation are also good.  If you are already willing to QUIT, you might have a lot of leverage to negotiate this.  How about a temporary part-time situation if you are burnt out?

PossiblyRare

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Re: Should I take a year off?
« Reply #19 on: December 11, 2013, 04:20:57 PM »
I'm early in my career, so perhaps you should defer to the more experienced commentors. However, this is my two cents:

DO IT! If you are disciplined enough, you can spend 6 months to a year showing the world what a self-starter you are! I think it could be very valuable in an interview to say, hey, I worked on some stuff 8 hours a day and look at all the stuff I made! Look at what I have to show for it! It also shows passion for that kind of work.

Also, my dad retired early after he learned a lesson from his boss. His boss was a great man who was doing the work of two people. Sadly, he died of a heart attack. My dad quickly reassessed his own goals in life, and decided his job wasn't worth his life. Work is important, but life is about living! Savings will happen, money will happen. But living only happens when you make choices to allow for it.

These are all good reasons, and I agree 100%. I think the one thing worse than death is dying before you had a chance to live.

Quote
Would you consider living JUST off of your wife's salary? That way you won't have to dip into savings, and it would be an awesome challenge! With you working from home, you might be able to bring down grocery and maintenance costs.

I would consider that for sure, but it is just not possible without moving. Her salary just about covers the mortgage payment but not much else. House prices have appreciated so much in this area, that I can't really move down either without leaving the area. It is possible though that we can sell the house and move to another state and buy a house without mortgage, in which case her salary would be more than enough (assuming she could find a similar job there).

PossiblyRare

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Re: Should I take a year off?
« Reply #20 on: December 11, 2013, 05:13:11 PM »
Agree.  You have a great salary, but you are honestly behind the curve on retirement assets.  Especially on this forum.  You could easily be FI within a few years if you can attain a high savings rate.

I understand. I found this site in May and it opened my eyes. Most of my savings I added since May, so my savings rate have been high since then, but it did not use to be that way. I also understand that if I had come to the same realization 10 years ago, I would already have been "retired". But there is not much I can do about that at this point in time. For some reason it never occurred to me that I could "retire" before "retirement age". I only contributed to the 401k for the match, and sometimes not even that. Having said that, I have retirement savings in other countries (not included in above number) as well as almost guaranteed retirement income from at least one country (not including SS), so I think that even if I don't contribute another penny to my 401k I will still be all set at age 67. The only thing I really worry about is getting from age 37 to 67.

Quote
The above ideas about negotiating a work-from-home situation are also good.  If you are already willing to QUIT, you might have a lot of leverage to negotiate this.  How about a temporary part-time situation if you are burnt out?

My employer offers no flexibility whatsoever when it comes to part time and work from home. They want me to be in the office so I can enjoy the perks they provide.


PossiblyRare

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Re: Should I take a year off?
« Reply #21 on: December 11, 2013, 05:34:24 PM »
I agree with others that your savings are low for your income and low for a foray into self-employment.  You're 37 now - what if you were to suck it up until you turned 40?  How much would your net worth be by then?  Could you get your investments/savings up over 500k (you should be able to do this easily)?  Could you finish paying off the mortgage (lowering fixed expenses even further)?

I think I would be able to roughly add $100k a year (across taxable and non-taxable savings), and if housing trend continues, the house could probably add another $150k in equity as well. I don't really want to pay off my mortgage since the rate is low. I think that if I stay at my current job for a few more years, the exit strategy would be to buy a house in another state with cash, and sell current house to extract the equity. I guess if I stay for 3 more years, I'd have roughly 650k in savings and a paid for $200k house in another state if all those things pan out, which would be a strong argument for me not to quit and just suck it up.


ShortInSeattle

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Re: Should I take a year off?
« Reply #22 on: December 11, 2013, 05:58:37 PM »

This is our situation also, and we've decided on the same approach (3 more years of sticking it out).

It's awesome that you have nailed down your timeline. We're still working on that. 3 years sounds nicely doable.