There is, however, a growing part of the equation that I’ve never factored into our net worth, and that is the value of my online business. Seeing my friend Steve sell Think Save Retire and witnessing J. Money parting with Budgets are Sexy makes the value of a blog seem more tangible.
I have no plans to sell anytime soon, if ever, but Logan Allec of Money Done Right makes an excellent point in the article below. Small business owners who are putting much of their energy and revenue into growing that business will have a difficult time charting their progress neatly on a line graph or spreadsheet.
Logan is an author and CPA with a Masters degree in taxation and a passion for helping people make the best financial decisions possible. Take it away, Logan!
As a Business Owner, I Have No Idea Where I Am on My Journey to FIRE (and That’s OK)
Setting and crushing financial goals has always been my thing, ever since I was a kid.
I’m not sure exactly when, but sometime before I entered high school I began using a spreadsheet program to meticulously track how much money I had, and I made goals for myself as to how much money I wanted to have by certain future dates.
Perhaps I became a bit too obsessive over my spreadsheet, but I distinctly remember finding a penny on the ground at school and being so excited to update my rudimentary net worth tracker for that single-cent increase when I got home.
Goals, Goals, Goals
Knocking Out My Student Loans
My passion for financial detail served me well in early adulthood as I developed a gameplan to pay off my over $35,000 of student loans.
Of course, I tracked each loan separately in my spreadsheet, ranking them from highest interest rate to lowest interest rate. And more than buying plane tickets to Iceland, going out to eat, or even buying a latte, I wanted to see those student loan balances drop as quickly as possible.
Once I had my student loans under control through a mix of aggressive paydown as well as refinancing, I started knocking down other financial goals such as helping my parents out, buying my first rental property, and stashing away my first $100,000 for retirement.
As I progressed through my twenties and in my career, and as I started reaching these relatively low-level financial goals, I started to become increasingly obsessed with the idea of having enough cash flow coming in from investments that I could quit my job and retire early. Essentially, I began daydreaming of what is know known as FIRE, or achieving financial independence and retiring early.
My Complex Relationship with FIRE
FIRE in a Nutshell
If you weren’t aware, the typical path of someone who successfully FIREs looks something like this:
- Obtain a high-paying job early on in life, such as in engineering or tech.
- Live like a poor college student even though you make multiple six figures.
- Stash away as much money as you can into investment accounts.
- Keep stashing until you’ve hit your “FIRE number,” which is some multiple of the amount of money you plan to spend each year in retirement. What exactly your FIRE number is, of course, depends on if you want to continue to essentially live like a college student throughout your retirement or if you want something a bit more comfortable.
- Retire in your 30s or 40s. Of course, some folks (hello IB FIREers) may retire in their 20s — though this is the exception — and naturally some people will retire “early” in their 50s, though this latter group isn’t necessarily the face of the movement.
My Early Retirement Dreams
Now, for the better part of my 20s, I was all about FIRE, though I didn’t know it by that name until after I was a few years down the path.
With my student loans dealt with and other financial goals reached, I wanted to shoot for the big one: retiring at 40 without a care in the world.
And for a while, I was well on my way to reaching this goal. I knew what my FIRE number was, I was well on track to reaching it by 40, and I even had my future earnings and expected annual contributions to my “FIRE stash” mapped out. At the time I was working in public accounting, which has a rather predictable career and salary trajectory, so I was reasonably comfortable with my calculations.
I was also extremely frugal in order to be able to stash away enough in order to retire early. I shared a room with three other guys well after I was making decent money, and I rarely spent money on anything except necessities.
Diving Into Entrepreneurship
Well, here was the problem with my FIRE calculations that I so meticulously spreadsheeted out: they didn’t take into account anyone’s hopes and dreams except for my own. I personally had no problem working long hours and climbing the corporate ladder so that one day I could jump off of it.
But there was someone who did have a problem with that. And that person was my wife, whom I met and married after I set these FIRE goals. And she wasn’t happy with me working so much.
So after about a year of spousal conversations, career reflections, spreadsheet tweakings, and soul searching, I decided to quit my job and go full-time with the blog that I had launched a few months after my wife and I got married.
It was at that point netting a decent five figures monthly, which when combined with my wife’s income was enough for us to maintain our lifestyle while still continuing to invest in the market consistently.
And while my life is much better now than when I was still working a corporate job in that I actually have a life now, this entrepreneurial leap meant a cold turnkey abandonment of my carefully-planned road to FIRE that hinged on a traditional career path.
Now, I jokingly say that I’m on the Entrepreneur FIRE path, which, if I’m being real, means that I have no idea where I am on the path to FIRE. And I’m OK with that because I love what I do now and would be perfectly happy doing it for the rest of my life.
So while I’m investing some of my business profits into traditional investments, I’m not socking away nearly enough to retire at 40 or even 50 based on these balances, their projected future growth, and my projected future contributions to them at my current rate.
The majority of my business profits, in fact, are reinvested back into my business.
Nothing is Guaranteed
And I’m reinvesting profits back into my business knowing full well that nothing is guaranteed.
This is especially true given my niche of digital marketing, which is a very fickle space.
So while on the one hand, I may be able to sell my website someday for tens of millions of dollars, on the other hand, a single Google algorithm update could wipe out a huge chunk of my business and revenue.
“But wait!” you say. “Can’t you just get a valuation of your business to know how far along you are on the FIRE road?”
Well, yes, I could get a valuation for my business. And it would likely be based on some multiple of revenues or profits or EBITDA or something like that.
But let’s be serious here. I’m a blogger. My business is literally a website that could be here today, gone tomorrow. Coming up with some multiple-based valuation and hanging my FIRE hat on that number is silly.
My New Gameplan
By comparison to my old job as a CPA, my new life as an entrepreneur lacks certainty. Not having a crystal ball, I have no idea what the market demand will be for what I do tomorrow, five years from now, or ten years from now. Certainly, the accounting profession is likewise becoming more and more automated every year, but it seems like it will be a few generations before high-end tax consulting will be taken over by robots.
Pursuing FIRE, on the other hand, rests to some degree on predictions about the future: that one will have X dollars accumulated and invested by Y point in the future. And those are predictions that I just can’t make right now.
Now, just because I’m not too sure where I am on the path to FIRE doesn’t mean that I’ve dismissed the idea entirely. It just means that at this point in my life I’ve tweaked it to focus on the “FI”, and especially the “I”, and less on the “RE”.
What I really value now, especially as a new father, is independence, which for me means having the ability to spend hours with my family on a daily basis.
At the same time, I’m shooting for the moon in my business. Maybe someday I could raise funding or sell the business and walk away with a bundle of cash and fatFIRE.
But even if I don’t, I’ll have no regrets.
Now that I’m actually doing something that I love on my entrepreneurial journey, my dream of early retirement is no longer the all-consuming goal that it once was.
Do you know where you are on the path to FIRE? Does entrepreneurship or the possibility of a future buyout complicate matters? Are you more into FI than RE? Let us know below!