Cash-flow free for nearly a year!

There was a lot of positive response to my post two weeks ago about living carlessly for a year, so today we’ll look at my financial situation and how I’ve been living with a very meager incoming cash-flow for the past year.

Though a little bit of money flowed in here and there via various freelance writing gigs and advertisements, it was by no means equivalent to a full-time salary. Over the past two months my incoming cash flow has increased more and more each day, but there’s still a story to tell from the previous ten months.

Resigning in a Recession

One year ago I resigned from my full-time job as a Senior Tax Administrator at State Street Bank. While my time at State Street was beneficial and lucrative, it simply wasn’t what I wanted to do for the rest of my life. Armed with that knowledge and a hefty savings account I turned in my resignation letter and looked to the future.

A lot has already been written on why starting a company during a recession might be a wise choice, but let me go over a few points briefly [also check out Paul Graham’s “Why to Start a Startup in a Bad Economy” post and this article from the UK Times Business section by Rachel Bridge).

Five reasons to start a business in a poor economy:

1. You might lose your job; a side business provides a safety net.
2. You likely won’t earn a big raise, so you’ll lose less by quitting in a recession.
3. Prices and thus costs will drop during a recession.
4. If you can succeed in a recession, you’ll thrive when we recover.
5. Value will be a priority for everyone, new companies can gain business by pricing low.

Successful Savings

At the time, I had no real plan about how I’d make money but honestly, it did not concern me. Nearly all my friends and family members were shocked by my resignation. After all, every economic indicator was pointing to a long term recession in the United States and global economies. A lot of people thought it was foolish to leave a well paying job to pursue my passions, especially when I did not know exactly what those passions were!

Readers of My Last Name Means Money know my opinion that storing as much money as you can in online savings accounts is vitally important to your success and tolerance for risk. It’s an obvious tip, but one I implemented very well. Once my savings account reached a level where it could fund my lifestyle for at least six months, the risk became bearable.

Wise Investments

A big reason my savings account is still supporting me is that I aimed to withdraw money only when necessary. There were many times I failed and made foolish expenditures, but for the most part I stuck with the plan and still have enough cash to ride me through the next six months. Overestimating how much money was needed to survive for six months also gave me plenty of leeway to afford those not so wise spending decisions.

A big use of my savings account went towards investments that led to a simpler lifestyle that was easier to afford. My used bicycle easily paid for itself countless times now through improved health, lowered transportation costs and free entertainment. It also gave me plenty of time to think while pedaling about the city of Boston. Time to think is a very valuable asset.

Another investment was continuing to be a Boston Celtics season ticket holder. Though it was a huge use of my money, most of the tickets ended up getting sold to friends at face value. Sure, that cash didn’t earn any interest but I was able to hook up my friends with Celtics tickets and hold a great contest at The 42nd Estate to win a pair of Celtics playoff tickets. It’s a product that has maintained it’s value and allowed me to get back money throughout the year that otherwise might have been spent on a trip or other use that I could not re-sell.

I also continued to pay down my student loans and am now less than $3,000 away from being completely debt-free! The wisest investment I made by far, however, is the one I did not make. When I resigned from State Street I also elected to not re-invest my 401k into an IRA. Instead, the money has sat in a Citibank account as liquid cash. I would take a hit on cashing out my retirement account early so for now it sits there earning a little interest, which is immensely better than losing half its value in the stock market. Sometimes doing nothing is the best action.

Photo via Google Finance.

A few not so wise expenditures:

• Xbox 360 Console – great release for frustration but no time to play with it.
• Second bike and bike frame – planned to fix up the first one and build a bike from scratch but again, no time.
• Countless domain variations of the42ndesate.com – a few were OK but I went way overboard with this one.

Pinpointing my Passions

Along the way many, many mistakes were made, but these mistakes enabled me to learn about myself and my true passions. Sometime in November/December I realized my passion was right in front of my face the entire time. I love blogging and social media and spent a lot of time learning and growing my knowledge in those fields. It was then that we began an overhaul of The 42nd Estate. We recently pushed out a new design and began publicizing our service offerings:

• Freelance writing
• Blog & social media consulting
• Web hosting

Over the past few years, I picked up a lot of knowledge about blogging, writing and maintaining WordPress installations. I also spent a lot of time researching how to tweak our servers and picking the brains of my buddies who are experts in the field, which has enabled us to begin offering hosting to clients who need it. I am by no means the world’s most authoritative source in any of these fields, but I also realized I don’t need to be. My goal was never to strike it rich, but merely to afford a simple lifestyle while using my knowledge to help other people and organizations become successful.

Over the past few months The 42nd Estate has begun acquiring more and more clients each month and genuinely helping people become successful. It’s a great feeling to finally discover your passion and realize it can be your job too. And that, my friends, is why the word “nearly” is in the title, cash-flow free for nearly a year!

Photo of all that cash is by Tracy O. Thanks Tracy!