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The security illusion

Could you be overestimating your personal financial security?

Having a job and a regular wage is comforting and secure, except if you lose
that job. UK stats say that 45% of workers will be made redundant at least once
in their working life. I’d expect the US and Australian numbers would be much the same.

In that sense, being a full time employee is very binary. Very secure and
reliable whilst you’re employed, but when you’re not, there’s nothing.

If Financial Autonomy is about having choices in life, then how does that
align with being fully reliant on an employer to provide you with the income
that you need to keep all the balls in the air?

Most of us do work for an employer, and that suits us very well, so how can
we align the desire for financial independence, with the financial
dependence associated with being a full time employee?

Financial security. Who wouldn’t want that? I often talk and write about
financial independence, using it fairly interchangeably with financial autonomy
as I think the difference between the two is fairly minimal.

Could financial security be another interchangeable term?

To me, the difference is in the mindset. Someone whose goal is financial
security is thinking about controlling the down side risk. The risk that things
will go bad. And that’s no bad thing. The old “hope for the best, but plan for
the worst” is certainly something we try to incorporate into our client’s
financial plans.

But can you really control poor management decisions made by your employer,
or industry changes that render your area of expertise redundant?

So how can you transition from valuing your job for the illusion of financial
security that it brings, to valuing it for the potential it provides you to
achieve Financial Autonomy, a far more useful aspiration.

Here’s a few ideas I’ve come up with. I’d welcome your feedback as to other
options you can think of.

Broaden your skills – always learning

To me the most obvious way to reduce the risk of being out of work for a
sustained period is to have more strings to your bow. If your desirability to an
employer is built around your skill with a particular software package for
instance, then what happens when the industry moves on and a new software
solution becomes the norm?

This is an exercise in seeing the forest for the trees. You need to take a
step back for your day to day activities and think about where your industry or
profession is heading. Are you building the skills now that will be relevant in
5 or 10 years?

Very often employers have budgets for staff development and training, so if
you see an area where you think you should develop your skills, hit up the boss
to support you.

The other good thing about undertaking some learning is that it highlights to
your management that you are someone with aspirations. You don’t plan on sitting
in the current role forever. You want new challenges, and if they don’t find
them for you, they run the risk of losing you to a competitor.

It may be that you take that helicopter view of your industry or career path
and find that the road ahead isn’t paved with gold. In fact what you need to do
is plan for a shift altogether, to an area with better long term prospects. This
is something we looked at in the last episode – Is Your Ladder Against the Wrong
Wall? So check that one out if you haven’t already given it a listen.

The side hustle

Another way you could improve your financial security is to be less reliant
on that one employer. Is there a second gig you could be doing to earn a few
extra dollars? I only came across the term side hustle in the past year,
but I love it, and it’s certainly a viable way towards Financial Autonomy.

Let’s say you have an office job Monday to Friday, but have always enjoyed
photography. Perhaps you could develop a little business photographing weddings
or children’s portraits after hours. That way, if ever you where to find
yourself out of your regular work, you have some money coming in from the side
gig, which you could potentially even ramp up some more with some spare time.

A side hustle could be a good way to try out an idea you’ve had and see if
you can find a market. If you get some traction it could even become your full
time gig. I was listening to a podcast this week where they interviewed the
comedian Wil Anderson. He did 6 stand-up shows whilst working in a regular day
job, before deciding to throw it in with the Herald Sun and devote himself full
time to comedy.

Creating an online course, app development, registering with Airtasker,
building niche websites, an eBay store, pet sitting, freelancing on freelancer.com.au or fiverr.com , Uber driver – there’s just so
many things you could potentially do on the side to reduce your dependence on a
single employer.

Build wealth

The stronger your financial position, the less reliant you are on your
employer. If you’ve got debt up to your eye-balls, then a few weeks with no
wages coming in and you’re in big trouble. But if instead you had little or no
debt, and several thousand dollars in the bank, then the pressure’s off, at
least for a while.

One way you could frame this is financial resilience. How long could
you support yourself and your family if you found yourself out of work?

Hopefully your job gives you a sense of purpose and satisfaction. But even
assuming that were so, I doubt you’d do it without getting paid.

So the great thing about your job is that it throws off money. Now of course
you need that money to live, but hopefully you can manage your budget so that
you can also save. Your full time job then, provides you with the fuel to
create financial independence – money.

One path to escaping the insecurity of a full time job is to have a plan to
build independent wealth, using the income your job throws off to do so. Now the
strategy appropriate to achieve this differs for everyone, but the key is to
have a plan. Pay down debts, build up assets, and in time you can put yourself
in a financial position where if the boss stuffs up, the business declines, and
you find yourself out of work, you can smile inwardly with the knowledge “you
might be broke mate, but thanks to you, I’m in good shape, I’ll be fine,
whatever happens”.

Become self employed

I guess the ultimate way to escape the insecurity of full time employment is
to not be employed, but instead run your own show.

Now, as anyone who has ever run their own business will tell you, being
self-employed is far from stress or risk free. Not everyone should run their own
business. Most people who move from being an employee to being their own boss
find they put in more hours, not less, and success is certainly not guaranteed.

But having provided that important caveat, shifting to self-employment is
certainly an option that you should weighed up.

A successful business will have multiple clients, and perhaps multiple
products or services, so your risk attached to any one party can be dramatically
reduced.

It could be that you can do a few different things, possibly even some as an
employee. For instance if your background was in sales and marketing, perhaps
you could consult to several different small to medium size businesses, whilst
also having a regular 2 day per week job running the marketing arm of a small
retail chain.

Perhaps true financial security comes from deriving your income from several
sources, be they different clients, different things that you do, or investment
assets that you own. One thing’s for sure though; whilst you can use your job
to create financial security, without conscious effort and planning, your
job won’t generously grant you that security. Indeed it may provide you with the
false confidence to put you into an extremely unsecure position.

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