Recent contractual turbulence at my 9-5 job has people nervous. Funding is uncertain. Job cuts are likely.
Thanks to my expertise and training, I should be OK.
But the situation reminds me that the pursuit of financial independence prepares us for corporate layoffs and recessions, even if we’re not 100% financially free yet. A potential layoff is precisely why I build multiple income streams.
And the passive income streams I’ve built pay me regardless of market fluctuations or what’s happening at my job. There’s some comfort in that.
A few years back, I was part of a corporate strategy meeting with my employer’s business partner.
The purpose of the meeting was to discuss an upcoming contract renewal bid for a large project. Our team was the incumbent, and this re-compete was expected to be highly competitive. Tens of millions of dollars was at stake.
Attending were 30 or so corporate honchos, analysts, small business partners, and key players who would be critical in formulating the proposal. One of those key players was the manager overseeing the project.
The meeting started with a standard round-the-room introduction of who’s who. No one, including myself, had anything impressive or interesting to say. Until it was the manager’s turn.
Don stood up and said, “Hi I’m Don. I’m the lead on this project, and I’ve been doing this stinkin’ job for 18 years…” he paused for effect, “and I’ll probably be doing this stinkin’ job for another 18 years!”
The attendees roared with insincere corporate laughter.
We Won, But Not All of Us
Months later, the contract was awarded to our team. The strategy that came out of that meeting was to low-ball the bid. The customer wanted cheap. Cheap won.
The project continued on the same path it had been on for the previous 18 years, with Don in charge, delivering robust solutions to complex organizational challenges. Whatever that means.
Don continued his ways, following strict company and client policies, never once straying from what he was supposed to do or say. He was a by-the-book kind of guy.
Then one day we got a short-notice invitation to a team lunch meeting. We’ll have pizza, so please show up.
That day the executive team announced they were bringing in Bob to be the new project lead. No explanation was given.
Nobody thanked Don for his 18 years of leadership. Don was done.
I Don’t Need This Stinkin’ Job
With Don getting tossed without explanation, it reminded me of the nature of my career. IT contract work can come and go rather quickly. That’s because the technology is always changing, and large IT projects are costly, mostly because the workers are costly. Money can be saved efficiently by cutting a few people here and there when needs change.
Since I’ve seen the sudden disposal of many decent workers over my career, I’ve always been prepared for the day that I’m suddenly let go. The best defense, of course, is to be an indispensable team member. But what if the contract is eliminated and everyone is fired, or they cut back enough people that I’m included? Then what? I’d be done too.
The nature of the industry I work in is another strong motivator for pursuing financial independence. As I aggressively pursue financial independence, my financial security increases each step of the way. Every day I work and each paycheck I receive makes me financially stronger.
The longer and harder I work, save, and invest, the less I worry about potential job cutbacks, and the more empowered I am in my career.
You can look at your employment situation and progress towards financial independence in four broad stages:
- Strapped – You need any stinkin’ job you can get
- Reliant – You need your current stinkin’ job to maintain your lifestyle
- Flexible – You don’t need your current stinkin’ job, but it’s a good vehicle for pursuing your financial goals
- Free – You don’t need NO stinkin’ job at all!
Here’s a graphical way to look at it:
Strapped – You Need Any Stinkin’ Job You Can Get
People who need a job, any job, are strapped for cash. These are the minimum wage earners, new college grads with loans coming due, or anyone that needs a job pronto to pay the bills. They can’t be picky, because without a job they’ll have to go into debt to pay the bills.
This is the worst financial situation you can be in. No one should be satisfied being strapped for cash as it gives you no leverage when it comes to finding a better job.
Reliant – You Need Your Current Stinkin’ Job
Once a worker makes it out of a strapped financial position, they’ll find themselves in the next stage of their career, reliant on their current job. Perhaps they’d rather be doing something else for a career, but they can’t afford to leave their current job because it’s the only way maintain their standard of living. Anyone that lives paycheck to paycheck in order to maintain a certain lifestyle is in this stage. To get out, they’ll need to step off the damn treadmill.
Highly paid attorneys, corporate executives, doctors, and some entrepreneurs often fall into this category if they are reliant on a particular job or career to maintain their lifestyle. Country club memberships, private school tuition, frequent fancy dinners and big car payments can take up a significant amount of cash flow.
Some people never make it out of this stage. When more money is earned, more money is spent. Happiness does not increase as success increases because of the want for more. This psychological phenomenon is known as the hedonic treadmill. As Investopedia puts it:
The tendency of a person to remain at a relatively stable level of happiness despite a change in fortune or the achievement of major goals. According to the hedonic treadmill, as a person makes more money, expectations and desires rise in tandem, which results in no permanent gain in happiness.
While many people of all incomes remain entrenched in this stage for years, those of us who desire career empowerment on the way to financial independence should aim to make this stage of their career a quick pass through. Do so by earning more, spending less, and investing the surplus (i.e. The Triforce of Wealth).
Flexible – Don’t Need Your Current Stinkin’ Job
This category comprises people who are on the right track to full retirement, but haven’t gotten there yet. They save and invest diligently, building a plentiful net worth that they can fall back on in case of an extended jobless period. They choose to work at their current job because it’s the path of least resistance (NSFW) to financial independence, but could get by on a lower paying salary, especially one that made them happier. They have the flexibility to take time off for travel or family matters, and can afford to explore starting a business or creative self-employment.
The test to see if you’re in this category is simple. During your next annual review, if your boss isn’t willing to give you a raise or suit your needs as an employee, could you muster up the confidence to say, “I don’t need this stinkin’ job” and walk out?
On multiple occasions, I’ve gone into meetings with my boss where I was willing to quit if my expectations weren’t met. Going that far was never necessary. But not needing the job gave me powerful leverage when negotiating employment terms.
By pursuing a path to financial independence, you become stronger and more secure each step of the way. Our family always has an emergency fund of at least 3-6 months of expenses in the bank. But even if that was depleted in the case of a layoff or other work stoppage, we’d still have our passive income and business income to fall back on. Plus our assets.
We could sell some of our stocks to pay bills. We could tap into our home equity to cover expenses for a period of time, or sell the banana stand. We could even access some of our Roth IRA retirement savings without penalty to get by if we had to. That’s far from ideal, but in a really enduring jobless situation, it’s an option.
Mathematically, our family could survive for many years without any employment. If we moved somewhere much cheaper, our current savings would last even longer. Doing this would drastically slow our retirement and college savings, but it could be done.
Free – Don’t Need NO Stinkin’ Job At All!
Finally, of course, is financial independence. After many years of building a financially secure portfolio of income generating assets, eventually you’ll reach your crossover point when you’re free to do whatever you want.
Over time while your career and pursuit of freedom progresses, you’ll move through the graphic from above. Get out of a Strapped situation as soon as possible. Then into the Reliant phase where you’ll focus on paying off debts, keep living expenses low, and aggressively save. As you move through that stage, you get close to the Flexible stage where your options increase, especially if you’ve built side income. Eventually, when you’ve hit your savings or passive income goals, you’re Free from all work.
Adding Time to the x-axis, the chart now looks like this:
The curved line will vary depending on how aggressively or slowly you progress. The key is to move out of the Strapped and Reliant phases as fast as possible over to the right. Once on the right side of the curve, you still need to work hard to reach freedom, but your financial strength, career empowerment and flexibility will fuel your progress.
Where’s Don Today?
I learned later that the customer wasn’t happy with Don’s ability to provide the appropriate human resources to a high-profile subset of the contract. He couldn’t because the company low-balled the contract and didn’t have the hourly rates to pay the right technical experts to do the job. Someone had to go. Don was a scapegoat. Firing Don wasn’t going to fix the problem.
Bob came in and took steps to alleviate the staffing issues by convincing the customer that higher rates were needed to hire the right experts. After 18 years, Don probably didn’t have the gumption to make that happen.
Don was in his mid-fifties and not ready to retire. He was hoping to ride this gig out for another 8-10 years before calling it quits. My hope is that he is flexible and will take advantage of this opportunity to do something better. He still has a job with the company, but his days could be numbered. Don’s future at the company is out of his control.
2017 Update: Don stayed with the company and landed a deputy role on another project.
What about you? Where are you in your career? Could you muster up the courage to tell your boss “I don’t need this stinkin’ job!”?
Photo credit: Emmet via Pexels
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