Age 32--should I spend my FU money?

[Katiek]

Congrats, glad the new job has made such a positive difference.

 

[enginerd]

Congrats. I am somewhat envious of you being able to walk away from your high paying job for something closer. I have dreadfully long commutes (usually 2.5 to 3 hours a day in total commute), but one year I was assigned to a project with a 15 minute commute. I felt like I was on vacation for that entire year....and I just looked it up...I worked 450 hours of overtime that year.

I often wonder if I too wouldn't be so hell bent on RE if I had a job with no commute and less stress. But right now I see the light at the end of the tunnel (albeit a long tunnel) so I forge ahead.

 

[aida2003]

The family business is still rocking along and paying me about $10,000/month (before taxes).

The way I see it, you increased your salary unless I've missed something. Now you earn $61k at your gov't job plus you get $120k from your/siblings firm vs. $170k (per your updated post) when you worked for/with your siblings. Plus you'll potentially earn a pension and you've got much better work hours. Congrats!

 

[Brat]

No, but I'd get a plan together to make myself happier, such as
1) Have my siblings buy me out of the business and end that headache. Partnerships rarely work out, and family dynamics make them even harder.
2) Put my legal and business smarts on the job market to find something closer to home with normal hours, like college administration, non-profit or government post.

If you are living on less than $50k/year, you can surely support yourself with a lower paying but more balanced job until your assets catch up and generate what you need, possibly only $1,250,000 or so plus some part time work. Good luck!

My thoughts as well.

Someone mentioned a Govt legal job. If this is correct you need to adjust your manager's expectations. It isn't as if you are on partner track in a law firm.

 

[Teacher Terry]

Aida: you missed something. His old job paid about 175k with benefits vs 60 now. He was still getting the 110k from the business his sibs run.

 

[Huston55]

Update: I am about two and a half months into the new government gig and have not had a single moment of regret. Quitting my high paying job had the potential to be one of the best decisions or one of the worst of my life, and it has turned out to be a great decision so far. The work is more meaningful than what I was doing for a mega corp. Getting home at 5:15 versus 6:30-6:45 everyday has made a huge difference on my quality time spent with my DW and kiddos.

One unexpected result of taking the new gig is that I have not been as hard core about ER as I was before. I used to read this forum multiple times a day. Now I read it once a week, if that. My desire to retire in my 30s seems to have been a product of the really bad work environment and commute that I had. Now I am shooting for 40 when my government pension will be fully vested.

The family business is still rocking along and paying me about $10,000/month (before taxes). I am urging my siblings to hire someone to run and grow it for the three of us. Net worth (including house) has grown to 1.05M.

Thank you all that responded to my original post and helped me think through this decision.

Congrats on the new job & increased "happy life" quotient! Perhaps you should change your avatar name to match it.

I did always wonder though, what kind of govt job enables you to vest for a pension in only 8 yrs of work?

 

[Teacher Terry]

Some states only require 5 years to be vested.

 

[Legally_dead]

Update: I had my one year anniversary at the Govt. gig on July 1. Still no regrets, and I do not know how I ever made such a long commute. It would have been impossible with a second child (who was born the same week I started the new gig last year).

The family business is afloat but on a downward trajectory. My sibs are poster-children for why second generation businesses fail. The single account notified us we we would be losing about 40% of the business. My sibs pulled a bit of a bait and switch. Their salaries were originally based on the plan they would diversify and grow the business. They both got a taste of good $ and being self employed and did nothing to grow the business. At one point my pot smoking bro said he didn't want to work more than 40 hrs a week and the account was secure. The 40% loss was a wake up call and to some extent the best thing that could have happen to get them motivated (cause they weren't listening to me). But it didn't last. After a few months of hard work, they are back to the "we don't want to work that hard, let's just ride this out" mentality.

In any event, I'm in good shape with my government pay and current investments. Net worth is at ~1,250,000 including paid for house.

 

[kimcdougc]

Thanks for the update. Look forward to seeing where you go from here. Sounds like you are on the right path all on your own without the family business.

 

[Legally_dead]

Here's an update:

The family business is in a death spiral. They lost nearly 100% of the account. I am no longer receiving distributions and my siblings guaranteed payments have been cut back to next to nothing as they try to find new accounts. They both claim they couldn't have done anything different and the failure to diversify is not their fault. Needless to say, I'm not optimistic the biz will survive. Frankly, it will be a blessing if it doesn't and will remove a bunch of conflict from my life.

My net worth has reached 1.3M (which includes a 225k paid for house and 122k 529 plan for my 1 and 3 year olds). Without the company distributions, we will have to reign in our travel budget and cut back on 529 contributions, but otherwise it will not affect our lifestyle. Plan is to cut back from two big trips a year to one big trip and now contributing $200/month to 529 instead of $1000/month.

It would have been nice if the business lasted, but I knew I would be lucky if it lasted more than 12 months. It almost lasted 24. The key to happiness is low expectations!

 

[Katiek]

Thanks for the update and glad your job is still rewarding and working with your personal life. Sorry the business isn't doing well, but based on what you posted earlier, not surprised. Glad that you weren't counting on that for your financial well being.

 

[Texas Proud]

Read (most) of this thread for the first time tonight...

It was easy to predict that 100% revenue from one customer was not a good idea.... and having the people run it wanting to coast is another sign that things will not work out... it is not surprising that someone else came along and stole the customer.... (you did not say that happened, so I could be wrong)....

I would have put some time into that firm... a NPV of that cash flow was over $1.5 mill.... so you let over 50% of your net worth go up in smoke...

 

[Legally_dead]

Read (most) of this thread for the first time tonight...

It was easy to predict that 100% revenue from one customer was not a good idea.... and having the people run it wanting to coast is another sign that things will not work out... it is not surprising that someone else came along and stole the customer.... (you did not say that happened, so I could be wrong)....

I would have put some time into that firm... a NPV of that cash flow was over $1.5 mill.... so you let over 50% of your net worth go up in smoke...

As I see it, there are only two things I could have done differently. The first is be more persuasive with my sibs on getting them to take action (such as hire a manager, etc). But with only a 1/3 vote my hands were tied. They were not receptive to any idea I had and took personal offense. For example, I proposed two years ago we pay someone to create a website. We had plenty of cash to do it. They disagreed. My wake and bake brother finally got around to it after he lost 40% of the account. Three months later he still wasn't done with it. We spent four hours fighting over why my sense of urgency on the website wasn't a personal attack on him.

The second option would have been to go to work at the firm full time. My sibs would have hated it (it would have meant a pay cut for them) but moral pressure from my dad would have overcome their objections. I still would have dealt with their two votes against one on my ideas. This was never a viable option because I couldn't hitch my wagon to my brother (who has failed at every thing he's ever been involved in).

I have no regrets. The biz income lasted long enough to nudge me out of the high paying corporate gig.

 

[CaptTom]

I have no regrets. The biz income lasted long enough to nudge me out of the high paying corporate gig.

Thanks for updating us. And re-affirming my belief that one's time on time on this planet is far more precious than money.

If I were a betting man, I'd bet that you'll be back here in a few years, telling us how you found a new gig that did even better than anything you'd thought of before, and are now ready to RE. Or maybe something you enjoy so much you don't WANT to RE.

Living your life the way you want sometimes has a way of bringing success far greater than what living with golden handcuffs can.

 

[ERD50]

Here's an update:

The family business is in a death spiral. They lost nearly 100% of the account. I am no longer receiving distributions and my siblings guaranteed payments have been cut back to next to nothing as they try to find new accounts. ...

Interesting thread that I had to go back and read from the beginning. Something I'm not following - who determines the distributions and your "siblings guaranteed payments" (salaries?)? Was this based on some sort of formula when the business was created?

At any rate, you seem to be doing fine with the work change and have your expectations adjusted correctly. Congrats on that! Your siblings? Well, I predict they will be hitting you up for a 'loan' in the near future!

-ERD50

 

[Legally_dead]

Interesting thread that I had to go back and read from the beginning. Something I'm not following - who determines the distributions and your "siblings guaranteed payments" (salaries?)? Was this based on some sort of formula when the business was created?

-ERD50

The guaranteed payments to my siblings (which we considered their salary) was spelled out in the operating agreement per a formula. It started out at 137k/year and went up or down (max of 8%) based on whether gross profit went up or down. The first year they grew gross profit by 6%. The bait and switch my siblings pulled was that their original amount was intended to pay them for all the effort they were going to put into diversifying. It was also largely set by our dad. Then they decided they only wanted a 40 hour work week and the single account was secure. Around the time we set up the business, my brother tried to switch from a formula to a percentage of gross profit. I wouldn't agree to it. He recently told me he didn't grow the company because I didn't agree to a pay structure that would incentivize him to grow it.

The distributions were split 1/3 to each of us.

Ultimately, I believe they didn't diversify because they were blinded by the amount of money they were making (altogether over $250k/year each) and they didn't want to put effort into something they knew I would own 1/3 of.

 

[Standard Staples]

The guaranteed payments to my siblings (which we considered their salary) was spelled out in the operating agreement per a formula. It started out at 137k/year and went up or down (max of 8%) based on whether gross profit went up or down. The first year they grew gross profit by 6%. The bait and switch my siblings pulled was that their original amount was intended to pay them for all the effort they were going to put into diversifying. It was also largely set by our dad. Then they decided they only wanted a 40 hour work week and the single account was secure. Around the time we set up the business, my brother tried to switch from a formula to a percentage of gross profit. I wouldn't agree to it. He recently told me he didn't grow the company because I didn't agree to a pay structure that would incentivize him to grow it.

The distributions were split 1/3 to each of us.

Ultimately, I believe they didn't diversify because they were blinded by the amount of money they were making (altogether over $250k/year each) and they didn't want to put effort into something they knew I would own 1/3 of.

First time reading your journey, but I'll stick around for the updates.

Based on everything you've said, there's a bit of schadenfreude associated with your siblings' situation. They clearly don't deserve the payoff of this business, as they've put all of nothing in. Fortunately, you were smart enough to not only see the writing on the wall, but to also have been financially wise along the way.

I'm going to boldly assume they haven't set aside much if any of their earnings, and I only hope they don't lean on your for financial support. Assuming you haven't already, I'd be especially careful about letting on that you're on track to retire early. Good luck.

 

[Legally_dead]

Update: After nearly two years of operating, my sibs finally put together a budget and projected revenue for 2018. Our LLC currently has about 64k in cash. If they do not get any new business, we will run out of money by mid-April. Projected to lose $90k on the year. They are trying to make me (along with themselves) make a capital contribution to sustain us through 2018. My position on that is that I will consider it based on the situation when and if needed. It's not a decision that has to be made now given the cash reserves. I analogized it to the Titanic. If I believe it's not the Titanic, I'll put money into it. And I'm not putting money into it sooner than I have to because then I lose the ability to decide whether it is the Titanic.

During a heated debate about whether I will make a capital contribution, my brother made a comment about my career going down the drain. He said he wasn't willing to let his go down the drain like mine had. He associates my pay cut and change in jobs as a bad thing. I came so close to putting him in his place by telling him my net worth. I'm thankful I didn't. It would have felt good but made things a lot worse.

 

[Bryan Barnfellow]

I am unclear as to why you would even consider adding more capital to this failing business venture. Venture capitalists have often said that they invest in good people along with good ideas. Re-reading your thread just now I'm struck by how predictable the outcome was going to be and that you saw this but were outnumbered by two imbeciles. I'd run far and fast and look out for your own immediate family. Don't let their long term prospects be damaged any further by your siblings.

You are a saint in my book. It must have been very hard to swallow your brother's outburst. Good for you for recognizing that it was his own sense of failure that was at the heart of this and you had no need to rub that in his face.

Best of luck to you and your family as you move forward. And please keep us updated as you see fit. It's a very interesting story.

-BB

 

[Bryan Barnfellow]

One more thing. As a lawyer you must have been keeping documentation of your advice about diversifying, your brother's lack of business initiative, pot-smoking, etc., yes? I'm thinking of the odds of a lawsuit against you when things go blessedly belly up.

-BB

 

[brucethebroker]

With such a large salary right now($200K/yr), why don't you just move closer to work? If you can knock the round trip commute down from 3 hours to 1 or less then that would be what i'd plan to do. If moving closer to work would result in a significantly higher cost of living then i'd probably go with the government job.

+1. I would add, why not rent a tiny apt. in the city? Spend weekends home, then drive to work, spend a night in the apt., drive home-rinse and repeat. T & Th in NYC, 3 nites at home plus weekends. (Many professional people travel away from home that much). For the difference in pay between current job and offered job, you could easily pull it off. Your commute would be cut big time with min. disruption of home life. Wouldn't have to do it forever, maybe another couple of years and then pull the trigger. You might even find a roommate to share the expenses.
Well done on your current financial achievements.

 

[brucethebroker]

Sorry, jumped ahead to comment not realizing it was an older entry....

 

[Legally_dead]

@Barnfellow--It's a lose lose proposition for me. If they fail (as predicted), they have essentially squandered what would have been my inheritance. If they some how pull out of this tailspin, then I'm stuck in a business with them. My brother is also desperately trying to use the current financial status and demanded capital contribution as a way to get me to just walk away from the business. I'm not doing that. I'm taking it month by month. For example, if we run out of money in mid-April, we can carry on for another month and a half simply by making ~$1k contribution each. Sticking with the Titanic analogy, if the deckhands have a good attitude/work ethic and there's a safe harbor in site, I'll put in $1,000. The next month, I'll do the same analysis.

They are too emotional/jealous/resentful/greedy to come up with this as a solution (and I'm not mentioning it until the bitter end), but we would be cash flow positive if they would agree to a percentage of profit as compensation. It would be less pay now for greater reward in the future if they can turn this around. That's how our dad paid them when they worked for him.

Also, I haven't documented as well as you might think. But I view my own legal exposure as minimal. One because there is no claim and two, I've seen the way they consume professional services. They won't have the money to hire an attorney and even if they did, it would be a train wreck of decision making.

 

[Legally_dead]

The family biz generated about $600 this month. Bro and Sis continue to draw their weekly salary, $1000 and $700, respectively. I proposed one of them take the rest of the month off as an unpaid vacation. My brother's response: "That's illogical and ludicrous. If it were a good idea we would have already implemented it." Bro said he was also busy working on "strategic objectives for 2018." Sigh.......

What does it take to get published in the Harvard Business Review? I think I have what would make an excellent case study on the pit falls of family business.

 

[Cayman]

"I have no regrets. The biz income lasted long enough to nudge me out of the high paying corporate gig."

And there you have it. Well played. Enjoy the holidays.