The security illusion - Episode 11

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 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? I’ve called today’s episode The Security Illusion, because I think for many people, they overestimate the level of financial security provided by their employer.  So what steps can you take to truly be financially secure?  Well, that’s what we’ll be looking at today. Financial security.  Who wouldn’t want that?  I often talk 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? When I think about the goal of Financial Autonomy, I think of it as something more proactive.  Unlike financial security, where the goal is to find somewhere safe, Financial Autonomy is about consciously building a situation where you have control, and where you’re not reliant on others. Financial security, in the form of full time employment alone, is I think an illusion.  But that doesn’t mean that you can’t be a full time employee and achieve Financial Autonomy.  Indeed that’s how most people would achieve their Financial Autonomy goal. 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 pod cast 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. One good resource you might like to check out is the web site Side Hustle Nation, and their podcast The Side Hustle Show.  There’s lots of good ideas and downloads there. Closer to home, Rock Star Empires would also be worth some of your time.  The principal there, Troy Dean, speaks with great clarity and frankness.  They’ve got a Facebook group that’s fairly active too.

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. If moving to self employment holds appeal to you, go back and listen to Episode 1 – how to be financially ready to start your own business. 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 insecure position. As always, we have a free toolkit to go with this episode so be sure to visit financialautonomy.com.au.  In this episode’s toolkit we’ve got a few of the key messages from this post, plus our Budget Tool, Useful websites list – and I’ve included the links to a couple of sites I mentioned earlier, and also the Freelancing resource. I hope you’ve gotten some useful information out of today’s episode.  Be in touch with any feedback.   Important Information: This information is of a general nature only and has been prepared without taking into account your particular financial needs, circumstances and objectives. While every effort has been made to ensure the accuracy of the information, it is not guaranteed. You should obtain professional advice before acting on the information contained in this publication.