Have you ever been fired? It was probably not as wonderful as it was for me. My boss did it in order to keep me working there. A pretty unusual story and the turning point in my life, it was the key to our financial independence. And it saved my health and sanity too.
Why Was It Good?
There were so many things wrong with my work life at the time. Sadly, people don’t make changes in their lives until something major shakes their world. This was one of those things.
It was a long story. The short version is that when things blew up, my boss handled it brilliantly.
What did my boss do? Well, first he fired me.
There was a long 10 seconds — is that possible??? Seemed like it. Done. Over. Oh my gosh! My heart sank. What was I going to do?
But then it changed. It was astonishing. He said he would like me to be an Independent Contractor. It would get me out of the office, away from the bureaucracy that was creeping into our small company since he sold out to a bigger firm. Oh, and he was planning on paying me twice my hourly rate, as is “usual” for freelance engineers, due to the short-term risk.
But, I ended up with that gig for seven years. SEVEN YEARS!
And instead of commuting nearly an hour each way, I could borrow the equipment and work from home most days. I didn’t think this type of life was possible.
I had been working 80-90 hour weeks plus commuting for 5 years. Something had to give. It was my sanity. He saved me.
I Was a Workaholic
I can’t say this is good advice, but I was doing the work of two or three people. It all started when I joined the small military contracting company with about 25 employees. About six months in, we nearly folded when the contracts dried up. It was 1995, and at the time, the military was cutting way back. It was called the “peace dividend”.
As we headed for bankruptcy, my boss bought the company for pennies on the dollar, thinking he would at least have a job for a few months just selling off the assets.
And then we got a chance on a military contract that could save things. I was doing electronics work at the time and had just started learning software to fill in for a key engineer that just quit. We got the chance to build a new product if we could do it in 10 weeks. TEN WEEKS! Yikes.
We took the contract and I started working 90 hour weeks. Hey, I could do both the hardware and the software. Both. And I did.
For me, this meant I devoted every waking hour to the effort. It became my “baby”. We succeeded, which meant that I could keep doing THE IMPOSSIBLE over and over again as we got contracts to build newer, better versions. I continued at that pace for the next five years.
I “owned” that product and knew it inside and out. I didn’t try to become indispensable. I just loved the work and became somewhat addicted to it.
The Blow Up
Okay, I’m dating myself here. But have you ever seen or heard the Architect skit from Monty Python? Here’s a clip from YouTube showing that oldie but goodie:
This audio excerpt is kind of how I was reacting to my boss on his latest announcement of yet another crazy policy brought to us by our new parent company. Take a listen. Enjoy!
I love the part where the guy switches to being conciliatory.
“I was a bit on edge just now!” I love that line. It says exactly how I was behaving.
Yeah, I was a “bit” on edge! Luckily, my boss was unbelievably helpful. Most people would have gotten angry and my job would have been history. Instead, he turned it into an opportunity. For both of us.
I jumped on the chance to start my own business and to make lots of money, but most importantly, to be my own boss. Run my own show. It solved my problems in so many ways.
How? Well, let see…
The Fear of Losing My Contract
Have you ever done freelance work? Even though I was charging an awesome hourly rate, the arrangement was based on the fact that my contract was usually for a few months at best.
My big fear was trying to find another job. With the military cutbacks, engineering jobs became hard to find. And I was working out of Sacramento. I knew I would probably have to return to the ridiculous commute to the Silicon Valley if I lost this gig. This would mean going back to putting 40,000 miles a year on my car again. That scared me.
Then there was the fact that we needed both our incomes to make the house payment. Plus, we were in the middle of a huge kitchen remodel, which even though my husband was doing all the work, was costing us a pretty penny.
We were actually lucky that we did not know that the contracting gig would keep going so long. Because we would have kept on spending as we had before.
There was the constant threat of losing my income.
And it happened. Several times I waited three to six months for the next contract. All the while, I would worry that was the end and I’d have to get another “regular” job.
And then, they would get a follow-on project and I would be crazy busy all over again.
That feeling was the incentive for us to start tightening our belts.
Paying Off The House
The first thing I wanted to do was to get rid of the house payment. Why? I know a lot of others in the personal finance community have debated whether to pay off the mortgage. Check out these posts from Derek Saul at LifeAndMyFinances and Mrs. Adventure Rich, who both consider the tradeoffs when you can potentially earn so much more in the stock market.
But, with the thread of job loss, our goal was to make it so that if I lost my income, I wouldn’t have to hurry to find another job. I wanted to be able to have the freedom to not work for a while and search for my next job at a comfortable pace.
I launched into an all-out effort to attack the mortgage, which was around $150,000 at that time. Our interest rate was 7%, a lot higher than in today’s market.
The good news was that with my large hourly rate and tons of hours of work, I was bringing in $3000 and sometimes $5000 every week. Of course that was before taxes and business expenses. But it was still a substantial amount of money, even then.
It took two and a half years, and it got to be really exciting. I would sometimes send $20,000 as an extra payment. I loved to see the next bill arrive, just to see how much we had whittled that principle amount down.
Then the day arrived. We wrote out the last check and owned our home outright. Step one!
My Financial Education Began
Right after being fired and starting my own business, I realized that I was now in charge of my retirement savings. Having a 401K for years, I had learned only enough about investing to choose a few of the mutual funds to direct my money to, and that was about it.
Now, I was setting up a Keogh plan, which allowed me to invest in anything. Anything. I didn’t know how to choose mutual funds or stocks. They had always provided a list of 10 or so. I had no idea where to begin so many possibilities. It was time to start reading.
I read. And read. I got hooked on the topic. Here is a list of what I read just that first year (note, I don’t have any affiliate links because I do this blogging thing as a hobby!):
- Stocks For the Long Run, by Jeremy Siegel – a great book to start with
- Contrarian Investment Strategies, by David Dreman – find and buy underpriced stocks
- The Warren Buffett Way, by Robert G. Hagstrom – how to think like a business owner
- Beating the Street, by Peter Lynch – learning from a pro who actually beat the market repeatedly
- What Works on Wall Street, by James P. O’Shaughnessy – statistics going back to the 1950’s
- The Small Investor Goes to Market, by Jim Gard – how to read an annual report
- Die Broke, by Stephen M. Pollan – use your last penny on your last breath!
These books really sparked my interest.
And it was March 2000. Just before the dot com crash began.
I Moved to All Cash in my 401K
I timed the stock market, except it wasn’t a dream this time. As I started learning about market valuations, I realized I had all my money in a really overpriced market. The dot com companies made little sense. P/E values were high or non-existent for many companies that didn’t even have earnings.
It seemed that the first thing to do was to roll my 401K into an IRA. Then I could regroup as I figured out more. But with the market seeming so much like a bubble to me, I decided that I would move everything in my 401K to a money market fund. The rollover could take up to a month to process, so this way, I would choose which day to sell.
I watched the market and chose a day that stocks were on the rise. And just like that, I was out.
There was another thing that made things interesting. At that time, broadband internet connections were just becoming available. And I had access to one through Comcast. With my business set up at home, it was not only a great idea for my work, but it allowed me to be able to start searching stock market information without the slow WWW – the World Wide Wait. That was how people joked about the common dial-up connections of that era.
Investing in Individual Stocks
I know, I know. I know what you’re thinking. What about VTSAX? Why didn’t I just use a whole market index fund?
I learned about index funds, but the problem that I saw was that the dot com hysteria had made the index itself quite risky. As I digested books about stock valuations, and read information about Warren Buffett, I started searching for companies that had safer prices.
What was amazing to me is that there were actually many companies that were good values at the time. The reason? Brick and mortar businesses were out. Online, dot com, that was the future. Investors were dumping perfectly good businesses and instead, opting for what seemed to me as a gamble. But it was all the rage.
With a fast internet connection and a newly opened Schwab account, I began purchasing individual stocks. Here’s what I learned:
- How to read an annual report and understand earnings
- As a small investor, I don’t affect the share price with my measly purchase, unlike Warren Buffett
- Many times a company did poorly, but would spin off great businesses. You don’t see this when you look at a chart.
- Losers could only go to zero. Winners had unlimited growth.
- Dividends are amazing! Especially with undervalued companies.
- After September 11th, the market reopening was historic. Some stocks didn’t open at all for hours and hours.
- Fees are really low if you rarely buy and almost never sell.
- Stocks are businesses. You own businesses. It’s hard to get that understanding with an index fund. I learned to think like an owner.
- You see how a stock gets hammered on bad news, but recovers. It helps you to realize that all reactions are overreactions. This makes for great opportunity.
Recently there was a podcast on ChooseFI with this topic. Brian Feroldi did a really nice job explaining several advantages, which are similar to what I found.
As I learned more and more about finance, I started tinkering with a spreadsheet. Asking myself various questions about our future, I entered test inflation rates and test portfolio growth rates. Experimenting with various numbers, I started to see for the very first time….that we could retire early.
Early? Okay, you millennial whippersnappers out there. Early for us would be something like me at age 52 and my husband at 55. I was 40 years old at the time and our combined 401K/IRA savings were around 400K. It was spring of 2000 and we were on the verge of a major market correction.
But I entered gains like 8%, and ridiculous inflation rates like 5%, just being a little conservative. We might live to be 95. Or more.
But it looked promising. So for the first time, we set a goal of leaving work in twelve years time.
The experience was truly a lifesaver. I got out of the cubicle and learned to run a business. Over the years, I eventually went from being a sole proprietor to establishing an S-Corporation.
I named it “YZE Designs” and my slogan was:
First you ANALYZE, then you remove the ANAL part, and what’s left is a YZE (pronounced “wise”) design. Not bad, huh? I loved that eraser logo! Not only that, but I got a custom license plate with “YZE S” on it!
And as a do-it-yourselfer, I tackled every detail on my own. From forming the corporation, to doing my taxes, I did it all.
The hardest part turned out to be payroll. I had to pay myself as an employee. If you take a look at all those items deducted from your paycheck, each of those represented something to pay. Workman’s comp, unemployment, Social Security, Medicare, Federal and State taxes, and so on. Some monthly, others quarterly, the actual payments went on on various forms. It was pretty involved.
There were few books to help because each state has its own rules to comply with. I ended up using a company called ZPay to allow me to do my own payroll. Amazingly, they are still around today helping people like me to DIY.
As I look back, I will always be grateful for this major shake-up in my life. I retired at the age of 51, and could have probably left work forever 5 years sooner.
I regained my health, had time for exercise and rest. And got my financial act on target. We are FI today because of it.
So thank you boss. Thanks for firing me!