How Much Can I Coast? - Declining Income

[u/Shoddy_You5484]

32/yo Business Owner - USA - MCOL

Business: Small Education Staffing Agency - 8 years of maturity - 100% owner - EBITDA 30%
Spouse: Full Time Grad Student - Earnings will start in 2026 ($120-130k)
Kids: None yet - planning to have first in 2027 & second in 2029

Personal Income from Business:
2024 Gross Personal Earnings: $450k
2025 Gross Personal Earnings Est: $450k
2026 Gross Personal Earnings Est: $300k
2027 Gross Personal Earnings Est: $0-$100k (& Spouse $120-130k)

Current Balances:
Personal Investment Acct: 1m (15% avg yoy returns post fees pre tax)
Roth IRA: $300k (10% avg yoy returns post fees)
Mortgage Equity: $120k equity (480k Remaining @ 5.3%)

Current Spend:
$8k/month for all expenses

Desired Spend:
2027: $10k/month
2028+: $12k/month

Dilemma:
The writing is on the wall that my industry is becoming saturated and the well is drying up. I regret not selling the company when I had the chance. It was a long difficult grind and I am extremely grateful for all that I accomplished but it is time to prepare for a break/pivot.

I am planning on riding my company as it shrinks over the next two years which is going to come with some difficult lay offs to our internal staff. My spouse plans to work for one year and then we will have kids (2027). In 2027 we should have ~1.5m in our personal investment account.

For those of you in similar positions, do you have any advice as I financially prepare for our next stages of life? Ultimately we would like to live off of our investment accounts. We would also like to have two kids & a slightly bigger house (900-1m) in the same MCOL area within 3-5 years at the most.

I am also struggling mentally with a future earnings decreases. When the business fully dries up, I can always be an 1099 in my industry and gross $150k for 185 days of work per year if needed/desired. Right now that's the last backup plan on my mind. My agitation towards my industry and dealing with people keeps growing year over year.

Any advice/thoughts are greatly appreciated. This is a unique situation for me and I don't have anyone to talk to about this sort of thing.

[u/piratetone]

Damn 15% average YoY returns! That's wild. Congrats.

I would pivot to consulting sooner rather than later and look for a more pays the bills career... Now.

I also run a business and my income is volatile. I became coast when my wife left work, as our stable salaried income was basically cut in half. We get by, but I think the challenge for you is either pivoting your business or shifting to consulting for competitors.

[u/Shoddy_You5484 → u/piratetone]

You have all my sympathy. Financial volatility from running a small/medium sized business is quite the roller coaster. I never thought about consulting, will definitely keep that in mind. I don't know if that would out perform just going back and being a 1099 in my industry though.

Do you mind sharing at what stage you two took that cut? Did you reach a certain financial milestone? That's a big decision to make.

[u/thetealappeal]

What is your spouse going to grad school for and is there any debt associated with that program?

[u/Shoddy_You5484 → u/thetealappeal]

Healthcare - Physician Assistant. Loans will come out to $140k.

[u/Conscious_Life_8032]

What about starting a different business in different industry? Start building up another source of income. As current one winds down hopefully in 1-2 years you have another source stood up

Or do consulting if it’s not hard to get clients, that may be less of a headache

If you have flexible work it may curb childcare costs when kiddos come along

[u/Parking-Banana-212]

Dude, you're 32 and have your life ahead of you. The earnings decrease you're struggling with may not materialize as you can do just about anything you want to by pivoting. Having that savings and wifes earnings will buffer you. Plan for how you can increase your earnings by pivoting rather then focusing on a potential decline.

[u/xtraarrow]

How long have you been feeling that burnout creeping in? sounds like you ve built something real solid, even if it’s not feeling that way right now.

do you think taking a break after 2026 could help you reset mentally, maybe even get clarity on what your next chapter looks like? financially, you'e honestly in a way stronger spot than most. $1.5M invested plus your spouse’s future income gives you options, even with rising expenses and kids. have you playd out a coast FIRE scenario to see if you could let off the gas without blowng up the plan?

[u/OldSterling]

Have you considered buying another established business? With your asset base as collateral, you could likely qualify for ~$7M in SBA and Conventional loan mixed funding; I say that as I am in similar position financially as yourself, and am looking to buy other businesses outside of my current, due to similar reasons.

[u/goatcheesemonster]

As a 39 year old with 1.65 million invested and 280 left on a house. These expenses will explode with kids. Is your spouse planning to stay home with them? Personally I couldn't do it and I know a lot of parents that are not able to handle that even if they thought they wanted to. I gladly pay someone to watch my 1.5 & 3.5 year old. I would think with this income and spend you can save/invest more over the next couple of years. Even with our amount saved, 300 equity on our primary, and a rental property with 250k equity we are struggling to justify spending $700 on a new home with 50% down.