Hi - been a while since I have posted. I am about to kick off a tech startup with a few other folks, leaving a Fortune 1000 company to do so. I've done startups before (pre-kids) so am familiar with the day-to-day of it. That said, when I did it before we were able to use my wife's insurance so I didn't have the opportunity to negotiate the ACA marketplace, and I was way more casual about risk anyway because... pre-kids. The startup is still pre-funding, so I won't be drawing a salary until we've secured investors and sufficient run-rate revenue to maintain a good expense/revenue ratio. I would love advice from this group about what steps you've taken in similar situations - basically ideas on how to prepare myself & the family for a not-too-disruptive experience during this period without a paycheck.
Here are a few steps I have taken so far:
- Set aside $150K in cash based on expense projections and promises already made to the kids (e.g. going to the Aus/NZ-hosted Women's World Cup in 2023)
- Funded an HSA with ~$50K
- Contacted friends at other companies to discuss soft landing options if startup doesn't come through
- Researched ACA marketplace options at a very high level
- Cut cable
Probably the biggest thing that'll be new to me is the health insurance aspect, as I've had either my or my wife's employer plan for my whole career. It *looks* pretty straightforward, but I would love any advice that others have about timing of enrollment, great options they've found in Florida, how to maximize subsidies when I drop to $0 salary, if I should be this scared of orthodontia costs for children, etc.
Other areas that I've wondered about:
- HELOC feels like it's probably not worth the effort, given the remaining balance, but maybe a good backup plan?
- Where to actually keep $150K of draw-down money until we 'make payroll' - was planning to put 1 year in checking and the balance in a linked MM at my bank, doesn't seem like there are super-clever ways to hold cash these days (says the guy old enough to remember 8% CDs).
- Less tangible: what, if anything, to do differently day to day, especially as it impacts the kids. I put aside what I did so that fun. discretionary things like after-school theater class or martial arts keep going without interruption, but I have to imagine there's a point at which we say "maybe not this year" to something like a beach trip etc. With kids that age, would you talk about being more conservative, or just keep going with business as usual.? We're not big luxury items spenders - did a cruise for my wife's 40th, have been to Disney a few times, get a beachhouse for a week or two in the summer - so it might be more or less invisible to them.
I appreciate any ideas folks have to make the idea of striking out on my own a little less scary... my first post here was 13 (!) years ago (viewtopic.php?p=153789). I've played it pretty safe for that whole time and thanks to the advice from this forum I feel (mostly) safe taking a little bit of late-career risk. Please let me know if you can think of anything I can or should do before this next step.
Profile:
Age: 47 (wife is 48, children are 10 & 7)
Tax Filing Status: Married filing Jointly
Tax Rate: 32% Federal 0% State (FL)
Salary: $165,000 + $100K commission (paid at 100%+ in most years) (him, she’s a SAHM)
Emergency funds = discussed above
Debt:
No credit card balances
Mortgage: $140,000 left at 4.25% fixed (Zillow value estimate $258,000)
Student loans: $20,000 consolidated at 2.75% fixed
Desired Asset allocation: 65/35
Specific allocation targets:
- Total Stock Market @ 40% of equity
- International Total Stock Market @ 40% of equity
- Small-Cap Value @ 10% of equity
- REIT @ 10% of equity
- Total Bond Market @ 50% of bonds
- Inflation-Protected Bonds (Fixed Income, TIPS, I-bonds) @ 50% of bonds
Current portfolio: $1.8M
Taxable account @ Vanguard:
>1% VTIAX Vanguard Total International Admiral (ER 0.16%)
His Taxable account @ Fidelity:
4% Total International ETF
His 401K @ Fidelity:
12% Total Stock Market
10% Total Bond Market
His Roth @ Fidelity:
4% Fidelity Total Stock Market ETF
6% ACWX IShares Total International ETF
5% IJS IShares SmallCap 600 Value Small Cap Value ETF
His Traditional IRA @ Fidelity:
>1% ITOT IShares Core Total US Stock Market ETF
His Rollover IRA @ Vanguard:
17% VTSAX Vanguard Total Stock Market Admiral (ER 0.05%)
13% VTIAX Vanguard Total International Admiral (ER 0.16%)
6% VGSLX Vanguard REIT Admiral (ER 0.10%)
1.5% Vanguard Inflation-Protected Bond Fund (ER %)
Her Roth @ Vanguard
2% VBTLX Vanguard Total Bond Market Admiral (ER 0.12%)
His & Hers Treasury Direct:
7% I Bonds (held @ Treasury Direct)
His inherited 457 @ Nationwide Retirement
11% Florida Fixed Fund (3.5% fixed return)
Other savings accounts (not considered in investments total above):
529 Account for 10 yr old: $109k
529 Account for 7 yr old: $73k
Steps to take before taking a job risk
Re: Steps to take before taking a job risk
If you don't mention the Women's World Cup happening in 2023 to the kids again they'll likely forget and you can easily save $20K - $25K+ in travel expenses. Amazing that kids that age make such long-range plans.
The closest helping hand is at the end of your own arm.
Re: Steps to take before taking a job risk
In their defense, that might have been my idea, not theirs
Re: Steps to take before taking a job risk
Most startups take longer in bringing a product or a service to market than anticipated. Raising capital also takes longer than planned. If there are multiple founders, it is not uncommon for some founders to leave because they can't go without a salary for a long enough time.
To minimize the risk, consider delaying leaving your job until the very last minute. Since your current compensation includes commission, I suspect that you are on the business development side. You are at even greater risk if you are dependent on your tech co-founders to develop the product or service that will be sold. Since delays are common, you might consider hanging on to your job (or even go part-time) until the company is really ready for the market. If the startup job does not present a conflict with your current job, you could also spend time over weekends and evenings on the startup, while the tech partners are working on the development.
To minimize the risk, consider delaying leaving your job until the very last minute. Since your current compensation includes commission, I suspect that you are on the business development side. You are at even greater risk if you are dependent on your tech co-founders to develop the product or service that will be sold. Since delays are common, you might consider hanging on to your job (or even go part-time) until the company is really ready for the market. If the startup job does not present a conflict with your current job, you could also spend time over weekends and evenings on the startup, while the tech partners are working on the development.
Re: Steps to take before taking a job risk
It looks like your children are at school all day, is it possible for your wife to find a job to supplement what could be a potential loss in income? Also look into refinancing the mortgage, very easy to get below 2.75%.
Re: Steps to take before taking a job risk
One thing to be aware of is that there is a minimum income requirement to be able to use an ACA plan; that’s $26,500 for a four person family so you’d need to find a way to generate some income in order to qualify.
Re: Steps to take before taking a job risk
THIS. Otherwise, you end up on Medicaid.
In addition, most ACA plans are in-state only which means only emergency room visits are covered.
Check that your doctors accept the plan you will be purchasing.
Re: Steps to take before taking a job risk
Super important point! Thank you, I had no idea.