Are you looking for a safe retirement? In these uncertain times, the best plan is to have multiple income streams. For the first time in 11+ years the stock market has fallen fast. (It’s recovered over the last few days, but I feel it is temporary.) The last time the market had this kind of drop it was 2008. While there was a concept of FIRE in the personal finance community, the acronym of Financially Independent/Retire Early simply wasn’t used. It was a lot like Kim Kardashian in 2006. She existed, but not many people knew who she was.
This is the first time that there’s a “trial by fire” of FIRE. Everyone is an investing genius when there is a decade-long bull market. This is the time that all those plans get put to the test.
I hope all the FIRE folks are doing well. I think the vast majority of them are. I haven’t heard any stories of financial ruin, yet.
I have faith that the FIRE crowd is doing well. I asked this question:
Are there any FI bloggers/people out there who only have income from investments?
— LazyManAndMoney (@LazyManAndMoney) March 16, 2020
Only two people responded that they were only dependent on investments. I hadn’t followed or heard of either of either one. They seem to be doing okay.
Mentally, I thought of all the people I know who are FIRE and they all had one thing in common: an income stream other than stocks/dividends. Most are bloggers and earn an income from their blog (*raises hand*, though we’re not really FIRE). Some have books. Some are money coaches on the side. Even if I didn’t have this blog, I’d still make money dog sitting. And many bloggers have a spouse that still works. Even if they don’t necessarily need this income it surely comes in handy with health insurance and providing a safety net when the unexpected happens. (Not that we’ve had anything unexpected happen in the last few months, right?)
Income Streams, Income Streams, Income Streams
I’ve read that if you say something three times, people get it. The most popular example is the real estate mantra, “Location, Location, Location.”
However, my favorite one is this:
My memory failed me. I thought he only said it three times. Still, it’s too funny not to share.
It’s hard to understate how important income streams are to FIRE. They are the ultimate safety net. Most of the people in the FIRE community are very good at reducing expenses when necessary. By definition, they’ve been focused on their money for a long time. An extra $10,000 a year can go a long, long way.
What we’re learning with COVID-19 is that sometimes income streams go away. It’s hard to say anyone has a solid business now – unless you happen to own a toilet paper or a hand sanitizer factory.
I’ll use my income streams as an example:
- I have zero customers in my dog sitting business. Usually people get dog sitters when they travel. No travel, no need for a dog sitter. It’s about as viable as a cruise ship business now. That’s one income stream gone.
- The stock market has been down as much as 35%. This would be the wrong time to have to take money out to live on. This is why you want to have a strong emergency fund. We’ll count it as a half an income stream.
- The blog income isn’t doing well. I wasn’t sure why until someone told me that companies aren’t spending on ads since their business is on hold until the coronavirus clears up. I’ll count this as losing another half of an income.
- We have 3 rental properties, but in total they lose a little money each month. We took aggressive mortgages on them and they’ll be paid off in 10 years. However, when they are vacant or a tenant can’t pay, it causes a lot of stress. This isn’t an income stream now, but it could become an income drain in the near future. If we get the mortgages paid off, this will become around a $3500/mo. income stream.
- One of the companies that I did freelance work laid off most of their staff (pre-COVID-19), but the other is still steady. That’s another half income.
When everything was working, I’d have a very good income, especially since I need the flexibility to take care of the kids. Now, after losing two and a half of my income streams, it is not as good. However, we can get by on it. Fortunately, we don’t have to depend on what’s left of this income, I’m one of the FIRE bloggers whose wife still has a traditional job.
Having multiple income streams is like having multiple back-up plans. A lot of people have told me that COVID-19 was worse than they could ever have imagined. Having all these back-up plans in place puts us in a much better financial position than most.
If you are looking to FIRE, have you looked at adding new income streams? Let me know in the comments.
I’ve thought of investors like you when I’ve read people wanting legislation regarding enforcement of rental agreement. They are along the lines of the “rich bad” landlord, and yes I know there are some, but many are smaller owners. If they lose their income stream they too could end up in trouble. Actually even the “big bad” landlords usually have a lender that needs to get paid so they can pay their employees.
I’ve got friend that does commercial loan workouts and they expecting a business boom.
I think we all underestimated this virus. My income streams are drying up too.
Although, I think this will be a good test. If my FI ratio can survive this year, it can survive anything. I’ll probably have to add my blogging and side income to have a chance.
Luckily, we didn’t inflate our lifestyle too much over the last decade. Also, my wife still works, as you know. This year is not a good time to retire, maybe next year?