The cracks in your Financial Independence plan

For the first time in forever, I have a few hours without a meeting or urgent tasks at work. Instead of catching up on long, important (but not urgent) tasks, I decided to sneak out for a bit and write this blog post. Work can wait, this job gives me at least this flexibility.

I’ve had a series of event recently that I could categorize as a crack in my financial plan. This has been putting some growing doubt in my mind as to how safe it all is, and how much of a buffer I should really get.

A quick summary for those who have not been religiously following my blog over the past few years. My FI plan is a bit atypical on two aspects: I plan to move to Japan (where my family in law is) and do early retirement there; and a huge portion of my income in early retirement is planned to come from a side gig that I’ve been driving for a few years. I estimate that the side gig will basically provide 40% of our income after I quit my corporate job.

There are several risks associated with this plan, and I’m seeing them more vividly today than I did a year ago.

First of all, I’m subject to currency risk. Mr Tako called it out clearly in one of my last articles: with my investments practically mostly in USD (a total world investment in ETFs means more than 50% of my money will be invested in US companies, technically valued in dollars), and income from my side gig also mostly USD based, swings in the USD/JPY pair have a dramatic impact on how much money I actually need invested. 2016 has shown me that my actual target in dollars can easily change by 20% one year to the other. That’s a lot and I don’t have other sources of income (at the moment) to counterbalance this risk.

More recently though, I got a sequence of issues with my side gig, which made me dramatically question how much I can rely on that income in the future. I thought I had it pretty conservatively done by estimating an income of 80% of what it really brings today. However:

Last month, Paypal decided to permanently restrict my paypal account. Bottom line, what that meant was I wasn’t able to receive or send any payments through paypal anymore. The restriction was “for life”, and could not be appealed according to them. Worse, it went way beyond a restriction of my account: all payment cards associated to my name/address became unusable on paypal, even if those cards had never been associated to my paypal account before. Paypal had not only banned my account, but my entire identity, from their services. Given the ubiquity of Paypal nowadays, this was pretty devastating.

In addition to the “day to day” use of paypal, this of course restricted my side gig quite dramatically, and quite suddenly: several payments from some of my affiliates got blocked, and many of these affiliates only use paypal as a method of payment. I had a backlog of several months worth of revenue that I could suddenly kiss goodbye. I couldn’t pay some of my partners either, and was losing credibility and opportunities at the speed of light.

As I was battling Paypal to get this (erroneous) decision reversed, another one of my affiliates networks contacted me due to some compliance issue in how I was advertising their product. They gave me 5 days to fix the “issue”, which was described in very vague terms (if you’ve ever faced a google adsense policy violation you probably know what I mean) or would otherwise close my account. Their email came to me while I was on vacation, away from any computer to even look into the issue, which added to the stress.

These 2 events, in isolation, would have been problematic but not terrible. However the fact that both happened roughly at the same time (after having been a paypal customer for about 15 years, and working with that other affiliate network for 7 years now, both of them without a single issue for years) was extremely stressful and made me question a lot of things. Was one of my competitors after me, reporting nit-picky issues to paypal and others, in order to take me down? How much would I lose if both paypal and that affiliate’s decisions couldn’t be changed? Was my early retirement plan only a dream, and reality was calling back?

I ran the math quickly. Paypal wasn’t really a source of income in itself, but given that many affiliate networks, etc… use it as their only form of payment, it did impact me. In particular, being banned from paypal as an “internet entrepreneur” dramatically limits future opportunities to work with new partners. It also prevented me from paying some of my partners on my site. What this would have meant down the line is that these partners probably would have moved on to other gigs, making it difficult for me to maintain the business at its current scale. So, even though Paypal was only representing maybe 10% of my side gig’s income, this was going to be a significant problem.

The other affiliate, however, was the real problem. I’ve grown that one to represent easily 50% of my side gig’s income over the years. Anyone with a blog will probably tell you that they have this one “golden” affiliate which represents a large share of their income. That is the one for me. Losing that one would have been devastating.

In the larger picture of my Financial independence plan, losing both meant losing roughly 25% of my “planned” income after I quit my corporate job.

Wow! Add that to the potential fluctuations of the Yen I described above, and my target egg nest could easily double! I don’t call this a safe plan.

I luckily solved both my issues with Paypal (that one was tough and took more than a month) and the other affiliate (that one took about a day of heavy work on my site and social media accounts). Interestingly enough, I am convinced Paypal’s restriction was totally unjustified, while the other affiliate was 100% right about me not being in compliance with their contract. (Interesting how in the case where I was wrong, fixing the issue took just a day, while in a case were Paypal was wrong*, getting stuff fixed took so long…)

But these events did not put me in a situation where I feel confident about my plan. If all it takes is an automated script from one of these companies for me to lose up to 25% of my income overnight, I just can’t simply rely on that.

It’s not all dark though. The idea of leaving my corporate job and focus on my side gig is, and has always been, only the first step in my path to FI. I do intend to keep growing my investments until the point where I don’t need the side gig either, but clearly the plan was to pull the plug on corporate job as soon as possible and rely a lot on the side gig moving forward. With the recent events I’m not sure I want to trust this that much. This brings the following potential solutions and questions:

  • Do I want to work a bit longer, to accumulate a bit more, and make the side gig income less necessary? (in other words, reduce the need for side income to, say, 50% of what it actually brings, rather than 80% today?)
  • Do I want to diversify my side gig’s income much more than I do today? Today I rely on about 4 advertisers/affiliates, with some of them bringing much more than the others. Do I want to diversify here? How to address the payment method, when most of these would only use paypal anyway, in particular after I move to Japan? I’ve looked into payoneer for example and need to see if it would be a viable alternative.

Working longer to alleviate the risk sounds like the easiest approach, but it’s also the one I dislike the most.

My specific plan has specific cracks in its armor. I appreciate that issues like these probably make me find the problems and fix them, I’m happy to have run into these issues now that I still have my corporate job, as it gives me time and options to find alternatives.

What about your FI plan, what are the cracks in yours?

* I’ve been monetizing my hobby website for 7 years. Today I think I know when I’m right versus when I mess up. You won’t see me calling a given affiliates network “scammers” just because they rightfully enforce their policies on my account. It’s every company’s right to protect their brand and refuse to work with people they think are breaching their policies. In paypal’s case however, I really feel the ban was automated and completely unjustified. This wouldn’t be the first time: I’ve read horror stories of  people on the web who got their account permanently closed just because of some Paypal automation assuming they were running some adult site.

As part of retrieving my account, paypal made me sign a paper admitting I was the one who did something wrong. This sucks but I’ve also been told this wouldn’t hold in court if I were to sue them in small claims. I won’t give details into what they said the issue was, as I’m not sure I want to discuss this: as my wife told me, the fact that both Paypal and that other affiliate took action on my accounts recently shows that I’m the one who has not been paying attention to the fine print in some of these companies’ user agreements.

This is an interesting learning experience for me and for other website owners out there: operating agreements with affiliates network, payment processing systems, or advertising networks evolve regularly and have lots of fine print. Sadly the only way to not make a mistake is to be over-conservative in what you do with these networks, to a point where you’d almost rather not use them.

Some pieces of advice: Just because a big site advertises some affiliate network in a given way, doesn’t mean they’re not breaking a rule, and doesn’t mean you are allowed to do it too. Read the agreements closely, and read them often as they evolve. As I reviewed some of the contracts, I found many things I was doing wrong with some of my affiliate links that I thought were ok. Another thing, do not trust “affiliates plugins” on your wordpress blog for example: some of these plugins might do something that’s in total breach of your agreement with the affiliates network. The same is true for some popular web entrepreneurs out there recommending you to do some things that are actually against many affiliate network rules (“pretty links” come to mind)

  1. László Gazsi
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  7. Patrick
  8. theFIREstarter

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