Diversify Your Paycheck

I haven’t had a job since the end of 2000, when the Dot-Com I was working for dropped dead by the side of the road.

That sounds a lot worse than it really is. I have a long history of making money that doesn’t come from an employer and after a few months of trying to find a new job I gave up and haven’t tried since. Instead, I went back to being a tech-for-hire, a computer consultant, a techno-mercenary. The upside of that was that it was work I could do, and I had just enough contacts to get a marginal start. The downside was that I had to work with computers (and users) all day long, and I had just enough contacts to get a marginal start. The most technically adept consultant in the world will starve if he can’t find clients willing to pay for his expertise.

Fortunately, I had time to build up a client base because my wife was working full time. I had a pretty good base built up when, two years ago, my son was born and that all changed. All of a sudden, my dubious and variable consulting income was the sole support of my entire family. It was unsettling.

Two years later, though, there’s still food in the pantry and money in the bank.

Some people would consider it very risky to have a family depending on the uncertain income of the self-employed. You’re too vulnerable to loss of clients, or simple slow-downs in business, where there may not be much work for weeks at a time. The stability of a ‘real’ job is much more desirable.

Perhaps at one time that was true, but I don’t think it is anymore. The so-called ‘real’ job is no more stable than being self-employed. Sure, you have a steady, unvarying, paycheck coming in twice a month…for as long as it lasts. If your employer goes bust, or simply decides that for whatever reason they no longer need your services, you suddenly no longer have an income. (This has happened to me numerous times.)

Financial advisors are always talking about diversifying your investment portfolio, but you never hear them talking about your income portfolio.

As a consultant, if one of my clients goes bust, or decides for whatever reason that they no longer need my services, or re-locates out of the area (and this has also happened to me numerous times), I still have the income from all my other clients. The money I make being self-employed may not be as steady as a regular job, but it is much more fault-tolerant. If one client goes offline, I can keep running on the others; my money comes from dozens of businesses and individuals and it would take a lot for me to lose all of them.

The feast-or-famine cash flow does take some financial discipline to manage, but now that I’ve gotten used to it I like it better than a single paycheck. Perhaps I just have little faith left in the stability of employers, but the diffuse nature of my income is comforting, not worrisome.

It may be useful to you to think, not in terms of earning a paycheck, or an income, but rather of multiple sources of income. That might mean adding investment income to your salary (which could be as simple as interest on your bank accounts), taking up selling things on Ebay, or even a second job. Besides the financial benefits, adding sidelines exposes you to people and experiences that you might not otherwise have encountered. If you are currently between positions (don’t feel bad; that’s going to be more common in the near future, as the economy sags) consider becoming your own employer rather than selling yourself to the highest bidder. Maybe it isn’t right for you, but you might be surprised. Keep an open mind, at least; if you’ve been laid-off then you certainly know how fragile the so-called steady job can be.

In this modern, globalized economy, we’re all freelancers. Think about what you can do to protect yourself from the whims of the market. Your boss might be adding your name to a list right now.

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