It’s important to safeguard yourself against job loss, and minimise the impact of job loss on your financial security.
I had always thought that government jobs were fairly secure. Well it turns out that nothing is really secure – there is no such thing as job security.
The United States recently experienced the longest government shut down in history. The shut down lasted for 35 days, and ended late January 2019. It was estimated that there were 800,000 government workers living without pay as a result of a partial shutdown of the government.
Consider the government shutdown, together with savings figures. The median savings account balance for folks in the United States under the age of 35 is only $1,580. This amount does increase with age, and the median savings figures are as follows:
- Under 35: $1,580
- 35-44: $5,000
- 45-54: $6,500
- 55-64: $8,500
- 65-74: $10,000
- 75+: $11,000
To be without pay for a month, and with minimal savings is a burden for anyone. I have no doubt that many of those hardworking employees are now suffering financial stress, through no fault of their own.
Job loss without warning has always been something that has traditionally been associated with the private sector.
I have long held the belief that there is no such thing as job security, even for the public sector. The reality is, if a government shutdown can happen once, it can happen again.
And if your livelihood comes from the private sector, well as we know anything can happen. I’m not trying to paint a picture of doom and gloom, but rather to highlight the importance of being ready and able to handle job loss if and when it happens.
For many professionals, it may not be that difficult to find another position. Realistically that could still take several few months. And if you have the median amount of savings or less, being without an income will be tough.
Lessons learned
Build multiple streams of income
By relying on one employer for 100% if your income, you’re putting all of your eggs into one basket.
It is important to build a few streams of income, so that if one (or more) fails, you still have income from other sources. Examples of other income might include:
- A second job (splitting your hours between more than one employer) – with the gig economy this is becoming easier to do, and with the global push for workplace flexibility
- Income from investments such as shares and property
- Income from your own business, such as an online business
- Income from your ‘side hustle’
I’ve written about the importance of having a side hustle here:
What is a good side hustle, and why do you need one?
Build passive income to always work for you, even when you are not
Wikipedia defines passive income as “income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.”
Passive income is much like a tap that you can turn on, and just leave running. This type of recurring income is the most sought after thing in the working world. It might take you quite some time to understand that there is indeed a tap, finding that tap, and then making the tap flow.
Creating your own online business is an excellent way to create passive income. It can take significant time to set up initially, but once you have put in the groundwork you will start to generate income. Most of the time there is nothing ‘passive’ about it, because you’re working really hard to set it all up. The ‘passive’ part comes much later!
You don’t need to have money to generate passive income online. The way to do it is by creating an asset that gets bought repeatedly by people. Affiliate marketing is an excellent example of this. You may have a blog post with affiliate links to products that are very popular, and your readers continually find the blog post in google and make purchases through your links. For as long as your post exists it can generate income. Multiply that by several posts, and even several websites – there’s your passive income.
It’s important to be realistic about passive income. Don’t fall for internet schemes that make it sound as though you switch on an internet money making system and watch the money come pouring in. This NEVER happens so please don’t fall for it. It takes hard work to set up a passive income stream.
Save as much as you can!
It may sound obvious but it’s important to have savings. If something were to happen to your main source of income, consider the impact that would have. The more money you can set aside the better.
The 50 / 30 / 20 rule of thumb states that at least 20% of your income should go towards savings. Meanwhile, 50% (maximum) should go towards necessities, and 30% goes towards discretionary items. This is popular advice that is broadly accepted. If you can save more than 20%, that’s even better.
A good way to save is to set up a separate savings account that is not linked to your everyday account, whereby a portion of your salary (say 20%) gets directly transferred into the savings account. That way you forget about it while your savings accumulate. If you can offset your savings account against your home loan then your money continues to work for you. I would recommend making an appointment with your bank to see what financial products they can offer you to help you reach your savings goals.
Shop around for the most competitive home loan rates too – I did this recently and was able to reduce my interest rate after researching interest rates of the other big banks. My bank actually beat the closest interest rate, savings me thousands of dollars in interest every year. All it took was a few phone calls. I was so happy I took the time to do that.
To summarise …
It’s impossible to predict what will happen in the future, that’s why it is important to plan accordingly. Make sure you work towards:
- diversifying and multiplying your income streams
- aiming to create a passive income stream
- save, save, save!
Don’t forget to speak with your bank to see if they can help you with your savings.
Read about the platform that enabled me to create a passive income stream here.
What passive income techniques have worked for you? What other streams of income work for you?
Very educative post. A relative of mine who actually worked in a bank shared with me his regrets of thinking his job is secured. He was actually laid off with few of his colleagues and since then he took to the Internet to start affiliate marketing and he’s really doing well at it. This is one of the reason I don’t fancy any job beside mine.
Hi Ayodeji,
I’m glad your relative is now doing well with his affiliate marketing. It’s certainly a shock being laid off from a role when you think it’s secure. Do you work on as well?
Thanks for stopping by.
Cbeers
Melissa
I will agree with you if anything that happened in states is to go by their is nothing like job security wherther you are govaments employee or private the term job security should not be on our lips.this where’s I also agree with you the Importance of creating multiple stream of revenue that can sustain you in times like gavament shut down .we need to be wise and rise with occasion before it’s too late.
Hi Charles,
Thanks for sharing your thoughts here. I wish you all the best in creating multiple income streams!
Cheers
Melissa
A very responsible article, I have first-hand experience how work situations can change in no time.
I’d never heard of the 50 / 30 / 20 rule, what a great idea!
If you really want to be financially secure, then like you say, having a backup of a passive income seems vital.
Do you think there is a limit to how much you should save, or do you just keep saving for a rainy day?
Thanks,
Matt.
Hi Matt,
Sorry to hear you’ve had direct experience with unexpected changing work situations.
I personally don’t think there’s ever too much to save! That being said it can be a good idea to invest excess savings into things like property that can create genuine passive income, thereby creating another income stream.
All the best to you Matt.
Cheers
Melissa
A good post and advice for people today. As you say, there is no such thing as job security these days. The work environment has changed and is changing even more and faster as time goes on. The amounts of average savings that the different age groups today is alarming and does not bode well for this changing job environment.
Your advice to establish multiple streams of income is spot on and very possible to do these days. Doing so will protect people from the changing and less secure jobs and even allow them to build some savings for the times when they may get cut from their jobs.
I am older and have a couple of streams of income in place already but still work. I choose to do so just for the reason you mention. You never know what will happen, and better to be safe than sorry. I have done just as you suggest. Currently, I have many websites that generate income not entirely on their own, but with very little maintenance.
The areas of online marketing are many, with affiliate marketing perhaps being the easiest to get in place, and others include drop shipping, selling training courses, or even developing and selling digital or physical products. This is also something anyone can do (if I can do it, anyone can).
You hopefully have opened some eyes with this post and information, and are to be commended for putting it together. I enjoyed the read and content! Thanks…
Hi Dave,
Thanks so much for your thoughtful comment here. And thanks for your other suggestions of ways to make money online. I think that there is something for everyone online. There are so many different ways so make some extra income. I’ll be investigating training courses later in the year as another potential source of income. All the best with your websites Dave and thanks for stopping by.
Cheers
Melissa