Transitioning from Full-Time Employee to Full-Time Investor
Investor · Franklinton, LA · Member since 2017 · 43 posts · 35 votes
My wife and I have been investing for 10 years or so. About 5 years ago we decided it would be best if she stayed at home with the kids full time. During this time she has done a tremendous job not one with the kids, but with our finances and real-estate investments. We are now at the point where, she is asking that I start transitioning to full time investor because we don't really need my income although we certainly can use it. However, I work as a treasury manager for a fortune 1000 company and make a low-six-figure salary so it's not that easy to let it go. I've listened to podcast and read books which all make sense but making that leap from security to risky is difficult.
Is there any advice that someone can give me that has gone through a similar situation? If you were making $100k a year gross salary, what would be your net cash flow goal? Any help would be appreciated.
Would it be possible to consider changing your full time job to a part time basis (e.g. 60% part-time and still able to keep the benefits?) Or take an extended leave (say 3 months) to test out full time investing and see if you enjoy doing that?
Would it be possible to consider changing your full time job to a part time basis (e.g. 60% part-time and still able to keep the benefits?) Or take an extended leave (say 3 months) to test out full time investing and see if you enjoy doing that?
@Craig Jackson I've been in a similar situation that you are currently in and it can be very stressful. I recommend you look at your situation from a holistic perspective and not just purely from a financial perspective. Being an investor/business owner is completely different than a W-2 employee who receives a pay check consistently. For me, my psychological issues/thoughts about not having enough money were more difficult to get past than actually the financial position I was in.
Mywife was at a miserable corporate sales job so sheleft thesalesjob to focus on her photography business that unfortunately has yet to make a profit. I'dalways planned on leaving my six figure salary tax job to focus on real estate. I didn't hate my job, but I didn't feel like I was contributing to society the way I envisioned and I wasn't progressing in a career that I enjoyed and loved going to daily. Security/money as I mentioned before has always been an issue for me so it took a lot of self-reflection and encouragement from my wife to finally decide I to leave my corporate job. The factor that I believe thatfinally pushed me to real estate was that I wasn't pursing my passion and I knew I would never achieve my full potential unless I left my job.
I didn't have a net cashflow goal for a couple reasons. First, my current real estate ventures outside of my SFR's bring in large sums of money, but at sporadic times. They are developments and value add multifamily dealsso I do not receiveany distributions from the properties until at least a year down the road. Second, we have a large nest egg that if something went wrong we could survive on savings alone. I would recommend 6 months to a year of an emergency fund (total living expenses) saved so if you do not make any money you can still pay all expenses without changing your lifestyle. If you do not have an emergency fund then I would suggest your yearly cash flow goal be at least what your current expenses are plus the additional cost for health care.
I also looked at what my future earnings potential with my corporate job plus the real estate I owned then my earnings potential if I solely focused on real estate. I knew if I stayed at my corporate job I'd always make roughly what I was making at that point. My projection for working strictly as a real estate investor wasdefinitely more difficult to forecast, but I looked at the current projects I had going and how I could scale my business as a real estate investor. Iforecasted future earnings because our future expenses will be higher than what they currently are. I believe by scaling my real estate business I’ll be more successful than if I stayed at my W-2 job. Since you have kids this could be your case as well with future expenses such as possibly paying for college or otheractivities your kids plan to participate in.
If you enjoy your job and do not see your investment portfolio growing significantly I might suggest you stay at your job. However, if you believe your job is a hindrance to either your real estate career and or time with your family and you can either survive or thrive financially I would recommend you leave it immediately.
@Sherry Z. Thank you for the advice this is the direction we are moving. The plan is to cut down hours to 30 to keep benefits and we will start transitioning towards investing or saving all of my salary to get used to it. I will then offer my services to my employer on a contractual basis if needed. I've been blessed to be put in several positions that allowed me to save the company millions of dollars so hopefully this will be beneficial.
@Sam Bates Thanks for your advice. I'm in a unique situation because over the past 8 years we've grown our net cash flow to appx $6k per month in rentals and another $3k in other instruments. We also have sufficient savings, no credit card debt and have paid off most other debt besides our personal house note and her car note which will be paid off by end of year. The issue that I'm having is having to take a step back financially from $14k-15k a month to $9k , possibly slow up growth, and of course it's just hard to make the move being a very dedicated employee, although as you know corporate isn't as dedicated these days to such employees, which I've factored into this decision.
My wife, who we made the decision to have her leave a her job years ago to allow her to be more active in our boys lives, is also very supportive and sees the value in me staying at home to build wealth in my family, health, and other things that matter more than money. We will be working in partnership and have been for some time, however, I'm less involved today due to my work obligations. As mentioned to Sherry our plan is to find other opportunities to increase cash flow. In addition, my company is known to rehire employees that bring value to the company who like me made a decision to leave. I have a good relationship with the CFO and director of my department, so If things get bad I think I will have an opportunity to come back. Even with these factors its still so difficult to just let go. I'm a creature of habit and for 20+ years I've been used to working for a corporation and have advanced up the corporate ladder, however, I'm not passionate about what I do like I am real estate.
If you don't mind me asking what are some of the pros and cons of you making such a move that you've experienced? Do you have any regrets or unexpect things that occurred that I should be aware of? Thanks so much for your time.
I understand it is a tough decision and can be a time consuming decision to come to a conclusion. It is always personal preference and my pro/con list might not indicate this, but when I went to self-employed my life changed dramatically for the better. I feel like I can make an impact on this world much more than I ever could being an employee of a company. For me, money isn't everything and I believe I can do much more with the time I've now gained than I could when I was working consistently 60 plus or more hours a week.
Pros
Cons
@Sam Bates Thank you so much for your feedback. Your experiences are very similar to what I envision in my future. Kids, volunteer work, etc. are all very important to me. Currently I volunteer by coaching my kids sports teams, and my wife and I have opened our home up to fostering but, there is so much more I would like to do.
Also, I notice the constant 50-60 hour work week has an adverse impact on family life. There are many days on both weekdays and the weekend where I just don't want to do anything because I know Monday is right around the corner or I don't want to be bothered on the phone because I've been on it talking to bankers and such all day.
As I mentioned in another post, I'm in prayer about things and my plan is to take the initial step forward by attempting to move from a 40 hour employee to 32 hours which will allow me to keep my benefits. My next transition will be to either further reduce my hours or move to contract. My final step will be to move to full time investment. I see this as a 1-2 year transition.
Again thanks for your advice, I really appreciate you taking the time to provide some food for thought. It is certainly very helpful.
I have a goal to do this by 40 (which is tough to think about because 34-50 is the prime earning years of your life typically). My goal is half a million in passive income a year and I work a 6 figure W2 job now with a daily commute of 90 minutes each way. The thought of eventually leaving does worry me one day, but I hope the desire to have my own business, be my own boss, employee people, improve neighborhoods and spend more time with my family will overcome that. I have thought in the future of also cutting down from working 5 days a week to 3-4 and see how that goes and then gradually leave. I would give that a try first. I feel like I am talking to the 40 year old version of myself lol, I'm 30 FWIW.