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How One Early Retirement Has Been Affected By The Coronavirus

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One of the big “movements” in the financial world within the last decade or so has been the emergence of the FIRE movement. If you aren’t familiar with it, it stands for Financial Independence, Retire Early.

It has grown in popularity as the stock market kept rising in one of the longest bull markets in memory.

But what happens when the economic goods times suddenly turn bad? What does the pandemic and a recession mean for FIRE now and in the future?

I reached out to Paul Andersen to share his story about achieving FIRE to see what has changed in his life given the recent stock market activity.

Paul’s story is a little different than the classic FIRE story of frugal living and high savings. He’s more of an entrepreneur, like myself, and he built an e-commerce business entirely from home starting with $5,000 in cash and a $300 Chromebook. He achieved early retirement when he sold his business after three years for a tidy sum.

I think you’ll enjoy this conversation with Paul as he recounts his FIRE journey, shares his learnings from making money online, and gives advice for anyone aspiring to achieve FIRE.

You achieved FIRE by starting and selling an Amazon FBA business. What is Amazon FBA? 

FBA stands for Fulfillment by Amazon. Essentially it enables an entrepreneur to build and grow their own brand by leveraging the power of Amazon. In the simplest terms, you source a product for a low price, have a supplier put your brand on it, and then sell your product on Amazon for a higher price. 

People might not realize it but over 60% of sales on Amazon are from third-party seller businesses like mine.

Amazon FBA gives entrepreneurs access to two incredibly powerful forces: 

  • Fulfillment: Amazon ships each order for you. Trust me when I say you don’t want to be packing up hundreds of orders in your garage!  
  • Distribution: When you sell your product on Amazon, you get access to millions of customers. 

These two factors are what allowed me to scale up a 7-figure business with no employees and nothing more than a laptop computer. 

Side note: Starting a business doesn’t mean you must quit your current job. Many online side hustles have minimal startup costs.

How did you discover FIRE?

Via an existential crisis. I was 10 years out of school, in the midst of an unremarkable corporate career, and deeply unfulfilled. I started asking myself if I could continue for 20 more years and had some major doubts. 

The angst I was feeling led to some serious soul searching. Somewhere during this time I came across the concept of FIRE. The idea of financial independence wasn’t a tough sell so I started plotting how to get there. 

My family was another big motivator. We had our first child in 2017, and that experience has had a profound impact on my life. Financial independence is a gift and I know my experience as a parent would look and feel a lot different without it.

I saw two paths to achieving FIRE:

  • Path #1: Grind it out in Corporate America for another 20+ years while cutting way back on expenses
  • Path #2: Start a business and hopefully expedite the wealth-building process

After hundreds of hours of listening to entrepreneurial podcasts, watching YouTube videos, and learning from people in Facebook groups, I decided to start an Amazon FBA business. 

The side hustle I started in 2016 gradually turned into a legit business. I achieved financial independence by selling my Amazon FBA business in 2019. 

If I knew then what I know now I would have jumped the fence and gone off the well-worn path in my 20’s instead of waiting until my 30’s. I found being an entrepreneur to be more fulfilling and lucrative than working at a large corporation. 

I fell into this world where I was competing for promotions, chasing raises, and pining for the plum assignments. When I stepped back though, I realized I was playing a game I didn’t even want to win. And on top of that, I wasn’t building any meaningful wealth. 

You achieved FIRE within the past year. How has Covid-19 impacted your situation?

The impact has been relatively small with the stock market decline affecting us the most. But let’s be real. I was fortunate to start and sell a business.

People are fighting to save their small businesses and jobs right now.

I have my health. I still have my hand in e-commerce and can work from home.

Pursuing simplicity before the epidemic has made this season easier too. Over the past year we simplified everything from our possessions to our investments. More stuff and more decisions equals more stress. 

The thing we’re still trying to crack the code on is finding a routine and schedule that works for our family. We have a toddler and anyone with young kids at home can appreciate how challenging it can to balance everything.

What are you doing now that is different than before?

We’re cutting back on our spending and working to build up more cash. Being isolated at home makes it easy to cut variable expenses.

We canceled our Spring Break trip. Restaurants are closed so we can’t eat out. And unless it’s new sweatpants and a hoodie I have no need for new clothes. Our monthly credit card bill is a lot lower than normal.

The money we’re saving is primarily going into a money market fund. In uncertain times like this you realize the value of a cash cushion. 

Are you changing your investment strategy?

One of the biggest takeaways from the stock market correction is that it tested my tolerance for risk.

We're staying the course and counting our blessings but making some tweaks to our investment strategy. However, I don’t advise trying to time the market.

I thought I was cool with being pretty heavy into stocks. After you see stocks go down 30%+ in a month you realize maybe having a healthy allocation to bonds and cash is pretty smart and can help you sleep better at night. 

Is FIRE dead? How do you see things changing for anyone hoping to achieve FIRE?

Overall I don’t think the underlying desire to become financially independent is going anywhere. In fact, I think people may become even more interested in taking control of their money and time after living through this difficult situation.

While I don’t think FIRE is going away, I do think it will change.  

Short-term it’ll be harder to FIRE given the market and overall economy. But long-term my guess is that we’ll see some positives come from these hard times. I could see things changing in a few ways which all are positive:

  • Financial plans get dusted off: Most people roll their eyes when they think about creating and maintaining a financial plan. I suspect even many FIRE people have let their plan sit idle for a while. The downturn will push more people to create a financial plan and get back to basics when it comes to money. 
  • Bye-bye 4% rule? The 4% rule may feel too aggressive and turn into the 3.5% rule or 3% rule. You may have to boost your cash reserves if you can’t reduce your expenses—or do both. Being a bit more conservative doesn’t strike me as a bad thing.
  • Making money online will boom: The combo of job losses and everyone being cooped up at home will lead to a lot of lucrative new online businesses being created. More people will realize that creating a life changing business online is within reach.  

Speaking of making money online, what advice would you share for someone that wants to start an online business?

Find something that sparks with you, take action, and start something. 

Simply by starting something.

As far as advice, I’d say to remember that starting a business doesn’t have to be all or nothing. 

You don’t need to quit your job to start a business. That's probably a bad idea. You also don’t need to know everything at the beginning. There were hundreds of things I didn’t know when launching my business.

Take time to celebrate the small victories along your journey.

The truth is there isn't a one size fits all answer as everybody has different skills, interests, and money to put towards the business. I think the process I followed to find my business opportunity is something most anyone could do. 

  • Expand your horizons: I started out by immersing myself in relevant podcasts, Facebook groups, and newsletters. It opened my eyes to so many online business possibilities that I didn’t know existed. 
  • Reflect: After learning about what’s out there, I honed in on what felt was right for me based on my skills, interests, and time I had available. 
  • Reverse engineer your business: Lastly I worked backwards and studied people that had success with the same business model. You don’t need to re-write the rules so learn from those that have gone before you.  

One thing my experience made me realize is that we can reinvent ourselves anytime in life. Factors like our major, job, and past successes or failures don’t define us. There’s always a new story that can be written. 

Even if your business doesn’t take off, you’ll learn something. That learning could be the foundation for your next business.  

  • Don’t Fear Risk: My experience is that people underestimate the risk of following a traditional path while overestimating the risk of starting their own company. 

In a traditional career, you can get downsized, you can sacrifice your physical and mental health, or you can end up spending 40+ hours a week doing something that drains you. As we’re seeing now, there’s plenty of risk in that path too. 

I was scared to lose money. Scared to fail. Afraid my ideas weren’t any good. Scared I didn’t have the chops to do my own thing. 

I am a former CPA and worked in corporate finance. You don’t often hear of accountants leaving to start an e-commerce business.  

But even after some early failures I kept learning and just kept going. My side hustle income eventually replaced my day job income.  

It isn’t easy but until we leave our comfort zone, we don’t know what heights we are capable of reaching. 

What other advice do you have for people seeking financial independence?

Set goals, build a plan, and then block out the noise and just do it! 

Set Goals & Build a Plan 

Setting goals and creating a plan to achieve them sounds obvious. But I sense that most people don’t clearly define what they want in life whether that's in a job, relationship, or financially. 

I didn’t define what I wanted professionally or financially and for years I just floated along. That was a mistake. 

Say your goal is to run a marathon. You don’t just start haphazardly running. You create a plan and work towards that goal. 

It’s the same thing with FIRE. You need to clearly define your goal. Is it $1 million in assets? Is it $5 million? $10 million? If you get a grasp on your burn rate you can sharpen what that goal dollar amount looks like. 

Once you have your FIRE goal you can build a plan to help you achieve the goal. It could mean ruthlessly cutting expenses. It could mean changing careers. 

Perhaps it’s starting a business. The plan that ladders up to that goal will look different for everyone. But without a goal and a plan you’re just floating along. 

Manage Your Time Wisely

We live in an incredible time. The internet enables virtually anyone to learn how to start a million-dollar business and achieve FIRE by listening to podcasts and watching YouTube videos. The blueprint is right there. And it’s free! 

But there’s a catch… the internet will also try to distract you from doing meaningful work with the digital equivalent of junk food. So, information is abundant but the ability to truly focus is rare.  

Not long ago, I was the king of wasting time—Twitter, Netflix, YouTube, and on and on. 

Would you rather spend your time watching funny cat videos or building a business that can change your life and allow you to FIRE? I love cat videos, but if forced to choose, I’d pick FIRE every time!

Now can be the perfect time to scour the internet for ways to start (or continue) your journey to financial independence.

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