When I was growing up, my parents always encouraged to be a professional. I was told to aim for dentistry, medicine, and law. My parents wanted me to be a professional so that I could always create a job for myself. They knew, and wanted me to understand, that working for someone else meant that my financial security would be subject to my employer’s whim. They wanted me to have the security that comes from having the power to earn my own income.
This post is about reminding you that your wage is a burden your employer tolerates until such time as it can be eliminated. It’s not personal – it’s just business. The goal of a business is to maximize profits. This goal is met by lowering a business’ expenses. Your salary is an expense that your employer is always looking to trim and/or eliminate.
One of your goals should be to start, maintain, and grow a financial foundation. You shouldn’t be at the mercy of an employer forever. There should come a point in your life where you’re working because you want to, not because you have to.
Not everyone can be a professional, Blue Lobster!
I hear you, and I agree with that sentiment. Fortunately for you, there is one proven way for you to protect your financial health from the risk of losing your paycheque.
That method is called planting your money tree and making it grow. Not everyone can be a professional – this is true. But nearly everyone has the ability to set some money aside to create an investment portfolio.
Protect your financial health by having a stream of income that’s independent from your paycheque. Work on increasing that money stream until it’s big enough for you to survive on just in case your paycheque disappears at an inconvenient moment. Dividends, capital gains, interest on savings accounts – these are all forms of income that, if sufficient in quantity, can be used to replace your paycheque should the need arise.
You have an obligation to Future You to construct a solid financial foundation. Building your investment portfolio will create a waterfall of income that will eventually replace your paycheque. Investing your money for long-term growth today will allow you to substitute your paycheque with investment income tomorrow.
Nothing lasts forever.
Make no mistake – your paycheque will eventually disappear for one reason or another. You’ll get fired. Or maybe you’ll get too sick to work. Maybe your employer’s business will fail. Hopefully, you’ll retire on your own terms. Only the poorest among us are required to work until the day they die because of their finances. If you choose to work until your dying breath, make sure that you’re doing so because you want to and not because you have to.
The wisdom of my folks boils down to the following. A professional has more control over their income stream than an employee. If you’re a professional working for yourself, then there’s no conflict of interest because you’re both the boss and the employee. In both roles, your goal is to increase your profit because it is your income. When you work for someone else, they will increase their profit by reducing your income if they can. And if your salary can’t be reduced, then there’s always the option of simply not increasing it. This is a situation where the interests of the employer and the employee are at odds. As a professional, working for yourself puts the interests of the employer (you) and the employee (also you) in alignment.
I remember working in a grocery store when I was in high school and undergrad. I started at $6/hr. My salary went up every six months until I hit $9/hr. My boss told me that was the top range for a cashier. At the time, I just accepted it because what choice did I have? Well, I had a lot of choices but was not knowledgeable about them. I could’ve found another part-time job. I could’ve moved to the competitor, who was paying more. However, I didn’t know any better so I stayed. My point is that my employer imposed a limit on how much I could earn. I couldn’t do anything about that situation since I wasn’t my own boss. I wasn’t a professional.
It’s your choice.
Always remember that you have choices about where to put your disposable income. By my definition, disposable income is what is spent on the wants and not on the needs. If you’re already tucking a good chunk of your disposable income into your investment portfolio, then good on you. For the rest of you, what are you waiting for?
Having disposable income allows you to increase the odds that you will have a stream of income when your paycheque eventually goes away. Invest your money for long-term growth so that it’s working as hard as you do. Consistently invest from every paycheque you receive. People will tell you not to invest until all your other debt is gone. I no longer agree with that view. To my mind, time is too precious a resource. You need your investments to bake for as long as possible, even as you’re working hard to eliminate your debts.
Similarly, there’s a lot of debate about how much to save. Some argue for a bare minimum of 10%. Others push for 15%. My personal view is that you should save as much as you can, as soon as you can. Building an investment portfolio whose income stream will eventually replace your paycheque will take a long time for most of us. The sooner you start, the better.
We can’t all be professionals working for ourselves. Yet, it is still possible for the majority of us to reduce the fear of losing our paycheques. All that needs to be done is to start, build, and maintain an investment portfolio of our very own. It’s a very big goal and it might take decades to achieve. That doesn’t matter and you shouldn’t let it deter you. Future You needs to be fed, clothed, housed, and nurtured. Start taking care of Future You today.
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Weekly Tip: Cut back on how much TV you watch so you can get rid of cable. And you need not subscribe to every streaming service out there. Doing so means that eventually, your subscriptions will cost just as much as cable and you will be no further ahead.