As a mental exercise I will occasionally ask myself a question: could I retire today? The point isn’t to actually plan that option, but rather look at my current situation in a new light to see if it would be possible and what would have to change to get there.
So currently I have about $218,000 in investments, which, if you use the 4% rule, I could potential yield $8720 annually. Not even close to my target spending of $26,000/year or even my bare bones spending of $18,000/year. So this would be utterly impossible right. Nope, we crack open a backup plan and I use some home equity, after all I do own my house debt free. How could that work?
Well in my case I could sell off the current house and purchase a 2.5 story across town which has been converted into three rental units. By renting out a unit at $1000/month and living in the rest of the house we could boost our income to $20,720, which would be just above my bare bones spending amount. Hardly ideal, but never the less an option if for some reason I just had to get out today.
Or if I’m really desperate I could cram the my entire family into a one unit and rent the other two stories. At that point let’s assume the rent at $1800/month in total for two units and that would boost the income to $30,320 annually, which gives the plan a much needed margin of safety. Yet to do so would significantly reduce our living space, which while I’m ok with downsizing I’m not really prepared to move my family into less than 750 square feet space and become a landlord.
So what was the point of this? To remind myself it is all about choice. I’m choosing to work where I do, and I’m choosing my current lifestyle. Yet if I’m willing to consider other significantly different options, different results can occur. People can often feel trapped in their jobs, but reality is the trap largely exists in your own mind. The real question is: how desperate are you to get out? Depending on your creativity and what you can accept for a lifestyle either in the long or short term, entirely new options can be opened up in most cases. So don’t let today be a prison, find your own way out…it might not be perfect, but it is comfortable to know the option exists.
Could you escape today? If so, how? If not, what is holding you back?