Are we already FIREd?

[FIREdToBeExpat]

My wife and I are in our mid-30s, have two boys, age 9 and 1. We both worked for others early on in our career, but since 2012, we work from home managing our home-based consulting company. (The company, and LLC, was founded in and has been running since 2003 by my wife, and I joined full time in 2012) We are based in NY but we could be working from anywhere in the world as long as there is a reliable internet connection. Therefore, we plan to live overseas for a number of years starting this summer.

Our business has two parts; first is good old IT/Web consulting since my wife and I are both engineers with masters. The second part of our business involves the production of original online content (digital videos, sites, etc.) and it generates a six-figure income. We expect this trend to continue given the fact that we have signed syndication deals for our content with multiple companies.

As far as our personal finance is concerned, we don’t have any debt whatsoever; paid off home, car, etc. We have SEP IRA worth about $250k and our home + an investment apartment worth about $450k.

We have always lived below our means, regardless of how much we make. That doesn’t mean we are cheap, not at all, we do eat out a lot and love travel. We always pay our credit cards in full every month, and have never ever carried any credit card balance.

Given all these, should we consider ourselves Financially Independent and Early Retired?

 

[obgyn65]

What are your annual expenses ?

 

[REWahoo]

Given all these, should we consider ourselves Financially Independent and Early Retired?

No. I see you as self-employed and working from home.

Once you've built up a sufficient nest egg so that you can live off your investments and no longer need your home-based business to meet your expenses (for the rest of your life), you'll be FI. Once you stop working and are no longer involved in running your business, you'll be retired.

Others will be along shortly with dissenting opinions...

 

[marko]

Given all these, should we consider ourselves Financially Independent and Early Retired?

FI means your lifestyle can continue if you stop working. That's what the "I" stands for.

A lot of people are "wealthy".....until the paycheck stops coming in.

IMHO.

 

[dessert]

No. I see you as self-employed and working from home.

Once you've built up a sufficient nest egg so that you can live off your investments and no longer need your home-based business to meet your expenses (for the rest of your life), you'll be FI. Once you stop working and are no longer involved in running your business, you'll be retired.

Others will be along shortly with dissenting opinions...

+1
I'm with you on this one REWahoo.

 

[FIREdToBeExpat]

Thanks for the responses so far.

obgyn65: it changes but we tend to save 20%-40% of our income per year, regardless of income.

REWahoo: The second part of our business was born from a hobby of ours and it does not take that much of time at all. The six-figure income comes from this hobby alone and we expect that to go up going forward. I think FIRE people would also need a hobby, right?

marko: I think your thinking is also along with REWahoo. We have reduced our income from technical consulting lately. Going forward, licensing fees from our content would become our main income source.

 

[REWahoo]

REWahoo: The second part of our business was born from a hobby of ours and it does not take that much of time at all.

You have ventured into the frequently debated [-]oxymoron[/-] subject of the "working retired". Search the forum for "meat eating vegetarian".

 

[pb4uski]

I think of FI as not "needing" to work and being in a position to retire at any time with the stroke of a pen. I don't think you are there yet but you are well on your way.

Since the enterprise that pulls in a six-figure income requires so little time I would think of you as well positioned - just be thankful and enjoy what you have created for yourselves and don't fret about how it might be categorized by others.

 

[militaryman]

I think (based on your original post) that you indicate you have (apart from the home you live in and an investment apartment) $250k saved

"FI" to me would mean you can sustain yourself and family moving forward on the income that the $250k generates along with any net profit from the apartment rented. Also you could add to this any income that could be generated from other sources that did not require you to put forth effort (whether you consider them hobbies or work) It sounds like the "6 figure" income from some of the "activities" you participate in do "require" your effort and what could be called a "hobby" today could be called work tomorrow should your perspective change or an injury or impairment occur etc etc ... Now if you are saying that without your marketing, or creating new product a "royalty" check shows up each month in your account based on work previously created then I would say that income counts just like savings in the FI definition in that it is "independent" of you adding to it for it to continue.


Being "ER" would mean that you acted on the "FI" above and stopped working.

So.... No, not FI and not ER

No doubt, you have a great thing going though from the sound of it! But "financially" you are not "independent" of the stream of income coming in that you are "working" to provide. And since you are "working" to provide it (whether that be from the Bahamas or NYC) then you are not retired.

 

[Bestwifeever]

You have ventured into the frequently debated [-]oxymoron[/-] subject of the "working retired". Search the forum for "meat eating vegetarian".

Yes, and there really isn't a retirement badge to earn, so if you want to tell people you're retired, have at it. And kudos on your paid off home, rental, and nest egg at your age. But I would agree that you are neither FI nor RE. Is the second part of your business just recently generating the six-figure income--if not, are you not adding it to your nest egg while you are lbyming on the IT income (most people here see $1 million in liquid assets as not enough to fund a true retirement for someone your age)?

Many people here have some side income after they have walked from a career; for most of them it supplementing their retirement income, which is enough to support them.

But good luck and if you think you'te retired, enjoy it.

PS some clients would prefer not to use a retired consultant so I'd be sure not to call myself that in any business dealings.

 

[daylatedollarshort]

Once you have the money from your hobby business in a bank or brokerage account with your name on it and can live off that money you are FI.

The webmaster forums are filled with web publishers who thought the money would last forever and were very, very sad when it all ended one day due to events like the dot.com bust, competition especially from countries with low COL wages and expenses, partners going out of business, search engine changes, etc. and they couldn't pay their mortgages next month let alone be FI. The publishers who were making money from the mortgage, luxury goods and travel industries saw a lot of that income disappear during the recession years, so your niche matters a lot. Is it an evergreen topic? Is it recession proof? Will it be outdated in two years? Is it subject to business cycles?

Online content creation and publishing can be pretty competitive. Lucrative niches often invite intense competition before too long. Does your content have any barriers to entry that would keep your competition from creating the same type of videos and sites?

You are smart to be saving your money now, but as the saying goes I would not count your chickens before they hatch.

 

[FIREdToBeExpat]

OK, I’ve got it: We are not FIREd yet but we aim to be one very soon! My thinking was and still is that if an almost no-effort hobby/job/work could generate six-figure income and it has great potential to grow overtime, it is equivalent of having $3M portfolio with 3% SWR. We could very well live off of this income, if needed.

I agree that we are in a unique position since we are able to work from home, spend almost 24/7 with our kids, etc.

As far as the current nest egg size is concerned, we thought that our mortgage was a ball-and-chain, so we decided to pay it off as soon as possible. Therefore, we paid a 30 years East Coast mortgage within 5+ years. Going forward, our goal is to increase our SEP IRA and Taxable balances.

REWahoo - I love meat so I am not oxymoron I mean vegetarian

pb4uski - well said and totally agree!

militaryman - most of the time our licensing fees come in the form of wire transfer, not even a check!

Bestwifeever - My wife and I are with our kids 24/7. Does that count as retired?

daylatedollarshort - Totally agreed! six-figure income did not come overnight, but has grown into it after years of inventory.

 

[daylatedollarshort]

If you have a high income, your own business and can save a lot there are retirement plan options beyond SEP IRAs that are not widely publicized because so few people can take advantage of them. But you might be able to sock away 100K+ a year, tax deferred, with the right retirement plan. You might want to do some research in that area and talk to a pension consulting firm to explore your options.

I would say save it now because things change fast on the web, so make the money and save it while you can. Build up other investments with the money you save from your business now so you have multiple independent income streams in the future.

 

[Meadbh]

Bestwifeever - My wife and I are with our kids 24/7. Does that count as retired?
.

No, you are not retired. Ask any SAHM!

What you have is a good revenue generating business that you can run from home. From the information presented, you are neither financially independent nor retired. Your next goal should be to get to FI.

 

[marko]

I would say save it now because things change fast on the web, so make the money and save it while you can. .

Back in 2001, some acquaintances got a really great deal on a nice 6 bedroom/6 bath oceanfront house from an internet entrepreneur who's income literally dried up overnight.

One day he was making $800K per year, the next day...no so much.

 

[FIREdToBeExpat]

Evidently, the moderators did not like my username and I am not accepted as FIREd, so I am now going to be FIREdWannaBe!

 

[papadad111]

you are in an enviable position, no doubt, but be aware that if something happened to the market you are in (disruptive technology, competition, economic downturn) or some form of crisis impacting either you or your spouse (health, sudden death, accident) such that your business were to be discontinued or significantly impaired, you would be far from financial shape to be able to sustain the income required to maintain yours or your children's existing lifestyle.

As others have said, work on putting a big chunk of income away. As you reach the $2M level of after-tax savings (excluding primary residence) , you will be closer to what I would define as begin able to FIRE.

Great job, you are on the path. And it sounds like you are all having fun too...even better.

 

[FIREdToBeExpat]

you are in an enviable position, no doubt, but be aware that if something happened to the market you are in (disruptive technology, competition, economic downturn) or some form of crisis impacting either you or your spouse (health, sudden death, accident) such that your business were to be discontinued or significantly impaired, you would be far from financial shape to be able to sustain the income required to maintain yours or your children's existing lifestyle.

As others have said, work on putting a big chunk of income away. As you reach the $2M level of after-tax savings (excluding primary residence) , you will be closer to what I would define as begin able to FIRE.

Great job, you are on the path. And it sounds like you are all having fun too...even better.

Your points are all valid and my wife and I have considered and talked about them as well. As a matter of fact, paying off the mortgage decision was due to one of our talks about the topic. All said, the journey is long and we would like to enjoy the journey as well as the destination. Life is not just accumulating money, worrying about it all the time and then dying with stash of money. Don't you agree?

 

[jollystomper]

My thinking was and still is that if an almost no-effort hobby/job/work could generate six-figure income and it has great potential to grow overtime, it is equivalent of having $3M portfolio with 3% SWR.

You are in a great position, but always remember potential is not a guarantee and not the same as having.

Keep attention to your business as to not take it for granted and try to anticipate economic changes that can impact it. Keep saving/investing but also set aside money to have fun on the way.

 

[FIREdToBeExpat]

Keep attention to your business as to not take it for granted and try to anticipate economic changes that can impact it. Keep saving/investing but also set aside money to have fun on the way.

Well said and agreed!

 

[obgyn65]

From your answers to my question and others, I would say you are not there yet but will be soon.

Thanks for the responses so far.

obgyn65: it changes but we tend to save 20%-40% of our income per year, regardless of income.