Suddenly FI

[totoro]

I've had a night to adjust but it still seems a bit unreal.

I joined this forum a couple of months ago.  At that point, we calculated that we had seven years to FI (we are forty).  I did a full plan and had quite a bit of fun figuring out how to save a bit more here and there.  I enjoy reading everyone's posts and thinking about FI and how to get there or help others get there.  I thought we had seven years to figure out what to do after FI.  And then, last night we reached it.

No we did not win the lottery or get an inheritance. 

What happened is we had a professional business valuation complete yesterday.  One of our businesses, which is saleable and has been steadily growing, is worth twice what we thought.  That combined with the purchase of a triplex that reduced our housing costs to $200/month, makes the numbers work for FI.

Of course, we'd have to sell the business...  but I don't think we are going to. 

Why not?  We both enjoy what we do and have pretty good work/life balance and fairly modest interests.  We like spending time with family, fishing, reading, gardening, cooking, renovating homes, dinner parties and quiet nights at home.  All of which can be done without lifestyle changes or more free time.

What has changed?  I feel a bit more secure knowing it is a real option.  My dh is buoyed by the success of the business.  Other than that, not much.   

[destron]

That's a hell of a lot of spare change you just found under the cushion. Nicely done!

[sheepstache]

Oh my goodness, congrats!

Shouldn't this be under "Share Your Badassity" though?

[totoro]

I don't know if it is "badassity"... It could also be looked at as not being aware of the value of the asset "dumbassity" :)

[Nords]

What has changed?  I feel a bit more secure knowing it is a real option.  My dh is buoyed by the success of the business.  Other than that, not much.   

Congratulations!

I'd say another change is that you'll be a lot less tolerant of workplace "BS" wasting your time and your energy.  In other words you'll act much more quickly to bring your work into balance with your life, and you may end up deciding that you'll prefer to do much less of the former.

But if you can love what you do while tolerating the "dissatisfiers", then you've reached balance. 

Speaking of "rebalancing", is there a way to pull a huge chunk of capital out of the business to give yourself an annuitized stream of income with less risk?  You don't necessarily have to sell a business to do that, but you certainly should see if you can pay yourself a dividend.

[savingtofreedom]

Congratulations!  That is fantastic. 

[totoro]

Thanks Nords.  I agree, I have been thinking this morning that I may scale back on some of the work travel and put the time into our landscaping project.  I do like what I do, but I'm not sure if it might shift a bit because part of what I like about what I do is that I've optimized the balance based on FI goals....

As far as pulling out equity to invest, that is a good idea if we were to make more than the loan interest, but not realistic without selling as we have an agreement with our partner not to use the business as security.   Dividends might be good in terms of salary replacement as they have better tax treatment.  Will think on that.

I have been considering selling part of my business too.  In Canada, we have a capital gains tax exemption for the sale of shares of a small canadian controlled private corporations.  I might spend some time getting my head wrapped around a plan for that. 

Sometimes I've felt like I'm spending too much time thinking and contemplating - and reading MMM and other articles - and not enough doing.  Then (when I really thought about it :)) I realized that the thinking and contemplating time has led me directly from poverty to FI.

[Melissa]

Sometimes I've felt like I'm spending too much time thinking and contemplating - and reading MMM and other articles - and not enough doing.  Then (when I really thought about it :)) I realized that the thinking and contemplating time has led me directly from poverty to FI.

If more people spent time thinking and contemplating I believe that the world would be far better off.

Congrats on reachong FI this early in life!

[Self-employed-swami]

Congratulations!

I had a similar moment a few years ago, when we got the valuation back from my diseased parent's business.  It was worth double what we thought, and it was crazy.  I'm not FI because of it, but I have a rather large FU fund now, because of it. It changed my priorities a lot at the time.

Good work!

[arebelspy]

Congrats!

That's a well deserved FI.

[Guitarguy]

Congrats! My only advice is to be careful with those valuations. My father-in-law recently went through the exact opposite of your situation about 2 years ago. It postponed his retirement by 10 years and he almost lost his home because he had it tied as collateral to the business note. The business profit shot up 100% in the 2 years after he bought it but fell by four times that amount over the next year, and he couldn't find a buyer to even break even on it.

In short, congrats! You've obviously been steeply rewarded for taking on a statistically riskier investment, and that takes some real moxie.

[c]

totoro, that's fantastic. To me FI is all about having options, choosing to do what you do because you want to, not because you have to.

YAY!

[totoro]

Congrats! My only advice is to be careful with those valuations. My father-in-law recently went through the exact opposite of your situation about 2 years ago. It postponed his retirement by 10 years and he almost lost his home because he had it tied as collateral to the business note. The business profit shot up 100% in the 2 years after he bought it but fell by four times that amount over the next year, and he couldn't find a buyer to even break even on it.

In short, congrats! You've obviously been steeply rewarded for taking on a statistically riskier investment, and that takes some real moxie.

I think that is good advice.  I have some confidence in this valuation as it was done by a credible conservative evaluator with experience in the industry and was not paid for by us.  The payor had motive to minimize value.

Business can be risky and paper profits aren't real until you sell.  One of the risks is that things change before you sell!  That said, we are showing good growth and the industry is fairly stable.   

It does make me think more about business though.  I'm in business for myself and I think part of the exit strategy should be selling shares.  It is such a good way to make tax-preferenced money in Canada. There is a market for the sale of a professional practice, but it is not something that is a focus in my field and I don't think most of my colleagues think about it.  They think about client development way more.

[okits]

Congratulations!  And pretty amazing that you're not looking to change anything at this time.  It's a good indicator that you've been living well all along.

[Erica/NWEdible]

That's wonderful! Super happy for your success, great job.

[happy]

Thats great news! Congratulations!

[grantmeaname]

Congrats! Keep us posted about your transition, should you decide to retire soon. And if not, well, I'd love to hear about that too.

[totoro]

Thanks for the kind words!

There was a change today.  I said no to a very well-paying short-term contract that required me to travel for two days next week.  We have a lot going on with a move and kids stuff and, all of a sudden, I couldn't justify the time away vs. the money.

Ended well for me because they adjusted so I could do the work partly from home. 

[Adventine]

Congratulations! Out of curiosity, what industry is your business in?

[totoro]

PM'd you Adventine.