One of my major goals for 2015 is to quit my corporate accounting job to pursue an entrepreneurial venture. The traditional accountant lifestyle is not for me. This will be my third time walking away from an accounting job without another one lined up, and I actually prefer it that way. Ever since working my first full-time job I have a history of quitting without another job lined up:
- 2010: Quit my corporate accounting job of 3.5 years, to travel to Thailand and change industries to public accounting.
- 2011: Quit my public accounting job of exactly 1 year to start a business that didn't quite pan out and international travel plans that fell through.
I'm looking at taking a mini-retirement, as inspired by the concept from Tim Ferriss's The 4 Hour Workweek. I don't have a clue exactly how long I will take off from working or have every last detail planned after I quit but I know one thing is for certain and that is I will be financially prepared when I leave.
Here are the things I'm doing with less than 3 months left before I quit my accounting job in May:
Unfortunately, I'm not financially independent...yet. My goal is to be financially independent by 40 or so but sure as hell before 65. I know that taking time off from working and earning an income will impact my projected financial independence date but I don't feel that being financially independent will impact the type of lifestyle I'm after. Not being FI just means that I need to come up with a financial plan before quitting my job in the meantime.
Quit at the beginning of the month
Here's why it's best to quit at the beginning of the month: You get the full month's worth of medical/dental insurance paid by your employer. For me, this is worth at least a few hundred dollars. Not a huge amount, but still, it gives me time to travel, and do other activities, while covered with insurance before I have to purchase a policy on my own.
Save at least 6 months of expenses in liquid cash
I don't plan on not having a job for longer than 6 months (maybe around 3 months) but I at least want to have enough cash to get me through half a year. Six months of expenses at $2,500/month would be $15,000. I'm confident I'll be able to achieve this figure even given the fact that my cash balance is currently under $1K.
Estimate other sources of income
From now through May, I'll receive other sources of income besides my regular salary including federal and state tax refunds, company bonus, and a property tax refund. Adding all of these other sources will add to my liquid cash balance.
Save up my travel rewards from credit cards
By my estimates, I have approximately $9K in travel rewards among my points programs that I've accumulated over the last several years of playing the credit card game. If not all, then a significant portion of my travel can be funded with points that I already have. That way I don't have to dip into my liquid cash that I'm saving.
In order to ramp up my travel funds, I need to get aggressive with applying for credit cards and manufacturing spend to get even more credit card rewards. Since I may be going without a regular income for a few months, I want to make sure that my travel needs are easily met with points/miles obtained through credit card sign up bonuses. If each credit card sign up bonus is worth anywhere from $300 to $500 in travel, and I plan on applying for 3 credit cards by May, then I can expect add an additional $900 to $1500 to my travel rewards.
Save up my vacation hours
Saving up my vacation through May shouldn't be too difficult considering my current 75% full time work schedule. With a week off in February, March, and April remaining, I am able to get a lot done in that time. By the beginning of May I should have 120 hours of vacation saved up.
Reduce 401K, HSA, and IRA contributions
This is what I have the biggest internal debate with doing. One of my goals for 2015 was to max out all my available retirement accounts such as my 401k, HSA, and IRA for the second year in a row. However, since I need to conserve liquid cash I will be reducing my contributions to all of my retirement accounts in the meantime.
For my 401k, I will reduce my contributions to just 5% of my salary, as I want contribute enough to get the max employer contribution of 4% of my salary. There's no sense in leaving free money on the table!
For my HSA account, I've already amassed a balance of $8K ($2K cash, $6K investments). This is the kind of buffer I feel comfortable with since I plan on getting a High Deductible Health Plan during the time I'm not covered by an employer. Although, I have my HSA Investment account earmarked for retirement, this certainly can be used for medical emergences if needed.
I still may be able to meet my retirement contribution goals by the end of the year depending on my job opportunities when I re-enter the workforce later this year. But for now, it's not a priority to funnel money into accounts I can't touch until retirement.
Have backup sources of money I can access
Ideally I want to have enough cash on hand so that I don't have to worry about money but in the event of an emergency I have several sources of funds that I can access as a backup plan:
- Cash out some of my credit card rewards. I can redeem my stash of credit card rewards for travel related activities, but it also represents a source of funds I can access in an emergency.
- Liquidate Taxable Investments: I can liquidate my taxable investment portfolio to convert to cash.
- Rent out a room in my house. I've done this before but I swore to myself I would never do it again. My previous expereince with renting a room out to a stranger was not ideal. It may be interesting to rent it out to short term travelers or AirBnB guests. I love having privacy in the comfort of my own home and really can't imagine having to share my space again.
- Sell my car for a cheaper one: I love the used car I'm currently driving although it still feels like more car than I actually need. I could always sell it and get a car that's worth less and pocket the difference.
- Sell my house. This could be an option to raise cash in an extreme case. I am currently enjoying living in my house I don't plan on selling like I have considered in the past.
Aside from getting my money situation squared away before I quit my accounting job, I really need to make sure that I have some non-financial items buttoned up before I leave. To set myself up for success when I re-enter the workforce I am considering the following:
Not burning bridges
One of the most important factors in leaving my current job is to not burn bridges. I deeply care about my coworkers and boss and I don't want to leave them feeling overwhelmed with picking up my work. I've let my boss in on my plans to leave and that I am willing to stay onboard to train a new person.
Get a Letter of Recommendation
At my first full time corporate accounting job, I had a close realtionship with my boss. He was more than happy to write a glowing letter of recommendation for me. That letter had been a great resource to provide when I've sent out my resume and was one of the deciding factors in me getting my current job. My current boss has already offered to write a letter of recommendation for me as we also have a great relationship.
Reach out to accounting recruiters
One of the benefits of being a CPA, is that there is no shortage of accounting jobs I could work at. The reason I got this job was due to working with a recruiter. It's hard to imagine trying to apply to other jobs without the assistance of a recruiter. As a fallback, I could do part-time contract accounting and recruiters could help get me into some interviews.
Make a plan to maximize my time off
During my time off, I HAVE to be productive. Yes, initially after quitting a job there is the really wonderfull feeling of complete FREEDOM. This does, however, end up fading away and then the feeling of needing to make money sets in. Here's some activities I have planned for my time off from working:
- Travel at least 30 days outside the US
- Read more books, not just blogs
- Enjoy the outdoors. This includes camping trips, hikes, running/walking outside, and playing a sport. Staying active is key.
- Get in shape. I want to get back into the habit of working out and toning my body.
- Connect with other accountants and bloggers in person and online.
- Spending more time with friends and family. I've been a bad friend lately, hardly initiating get-togethers.
- Blog. Since I've started this blog, I've reached out to other bloggers and I'm really enjoying the encouragement and community. This is a fun project for me and allows me to get what's going on in my head and type it out on the computer.
The Bottom Line
Creating both a financial and non-financial plan has prepared me before I leave my job and I don't really fear the uncertainty around quitting without another job lines up. I don't like the idea of not receiving regular income every month but I need to experience a challenge once again. I need to struggle a little bit. I got way too comfortable at my job and sort of lost myself. I need to prioritize the important things and force myself to survive and work towards achieving my ideal lifestyle.