One issue that has been on my mind a lot lately is the concept of insurance, particularly when it comes to our careers. It’s not a very exciting topic, I know, but when you are advising on technical career management day in and day out, it is hard not to think about it, especially when you understand (and relate with) the concern that people have over job security and income protection.
And it is a legitimate concern. For although there are all kinds of insurance policies out there, you will be hard pressed to find a private sector company who will offer you career insurance. (That alone should tell you how risky our employment really is…)
I mean, here we think buying a home is one of the riskiest things we do and have to protect, and we groan about the high cost of health care insurance (for good reason), but at least they offer insurance for those things!
When it comes to our jobs and, coincidentally, our retirement packages (401ks, IRAs), no one wants to insure them….
Oh, I know, there is unemployment and disability programs, but have you ever had to live off of that? And just how sure are you that Social Security will be there for you?
Thankfully, we do have some options available to us to help build in some financial protections. They may not be as traditional, or as easy, as simply buying a policy, but let’s face it, peace of mind rarely comes that easy.
1. Put your earned income to work for you.
For so many of us, it is the other way around. We earn money and then work to earn more money and then work to earn more money. What happens, then, is that at whatever economic level we achieve, we are beholden to the money we earn. Take away the earnings, and we are left with nothing, or next to nothing, or with what little we saved.
Many advisors suggest savings as the wisest option. Put away a year or two of expenses, they say, and have $X millions stowed away in retirement. And although it sounds wise, it is tough to do, especially when inflation is right around the corner and our savings earn us nothing in interest.
The better approach, in my mind, is to begin investing…and not just in stocks…make the earned income work for you. In other words, make it grow. Personally, I like investments that have some velocity to them, they pay out dividends over a period of time and then you sell off your original investment for more growth at expiration (it is especially great when there are tax advantages to doing so (like when you invest in energy, real estate, etc.!). The management does not have to be tedious of these investments, the income is often considered passive (and less exposed to taxes), and you did more than just “saved,” you “built.”
Now, learning about these investments requires due diligence, of course, and most likely you will have to venture outside of your comfort zone, maybe even away from your financial advisor. So you will need to invest time into learning. But the idea is that you create a pipeline for yourself that involves more than just your manual labor. It may not pay all the bills, but it might pay some…and that is the point. It’s protected income outside of your earned income from your job.
2. Pay attention to taxes.
As professional income earners in the United States, taxes affect us the most. Period. And unfortunately, we do very little other than complain to try to ease this burden. But one thing is certain, middle-/high-income workers pay, pay, pay. (Remember, even if you received a refund last year…you still paid up first! In fact, it means you overpaid…your refund is not a bonus back to you but money you should have had all along…)
So learning a little something about the tax code can help put some of our earned income back in our pockets. And we don’t need a massive overhaul of our tax code to do it (although that would be nice). Taking the time to understand that our government rewards certain types of earnings/expenditures with credits and tax breaks (such as job, energy, and housing investors) and then (with the help of a wise tax advisor) figuring out how you can take advantage of some of these rewards makes a lot of sense.
Too much sense actually, but instead we often think our issue is more an earnings problem. “I just need to earn more!” Instead of “how can I make the money I have be more productive?”
3. Stop worrying so much about losing.
A lot of us refuse to invest beyond our 401ks. It’s understandable. Most of us have little we can afford to lose, and the markets, especially the stock market, is volatile and confusing. As a result, we willingly turn things over to someone else, who even at his or her best rarely holds much stake in how well we do. (This person doesn’t lose when we do; he or she just makes less off of us.)
Not to mention the fact that we handcuff our money into accounts that penalize us if we try to touch them before a certain age. So no matter how good or bad they do, all we can do is sit by and hope our unaccountable financial person is securing our future anyway. (My point is not to bash financial advisors certainly but to point out the simple truth about the industry: It still makes money even when you don’t. Period.)
Meanwhile, we somehow continue on our way feeling more secure as consumers than we are as investors.
“Investing is risky,” we say, while we spend, spend, spend on things that will likely never provide us with growth or returns. It seems to me, then, consumerism is really what is risky. We work hard to earn money to spend it on things that are devalued almost as soon as we buy them…that is losing over and over again.
At least with alternative investment (outside of retirement) losses, we can write some of it off on our taxes, take what’s left and try again, and have at least the hope of building in passive income or protection of our hard-earned money.
Listen. My goal here is not to give you financial advice but to get you thinking about ways you can build in some protection against career losses because, let’s face it, no one else is going to do it for you. Wise technical career management in today’s market should not just focus on getting ahead in the daily grind but also on building in layers of protection that help you secure what you have worked so hard for.