Job Security Is A Myth.
Tomorrow the sun will rise, later in the day it will set. This is part of a short list of life events you can always count on. If you're fortunate your list may include the unconditional love of a family member, your disdain for turtle neck sweaters, and certainty that today's music will never be as good as what you grew up on. If your list includes your current job always being there - wake up, smell the coffee, Job security is a myth! I too was in your shoes until I was hit with the cold hard truth.
"Job security is a myth!"
Your job is not guaranteed.
Do recession-proof jobs exist? The 2008 Financial crisis resulted in an unemployment peak at 10.2%. This was almost 2 years in when the recession had already ended. In contrast, just 2 months into the 2020 Pandemic and 10's of millions of people have filed for unemployment bringing the unemployment rate to over 14%. Among this 14% are many professions that were once seen as “secure”.
As I reached out to friends and colleagues, teachers, doctors, physician assistants, information technologists to reconnect while sheltering-in-place I heard stories of how some had been fired, furloughed, hours reduced or had pay cuts. Over 1 million health care workers lost their jobs. Ironically, the profession on the front-lines fighting the pandemic was having trouble finding work.
Past recessions have shown us retail, finance, hospitality, and tech jobs may be subject to massive layoffs however, the 2020 pandemic created new fear in the perceivably secure health care field. If these other essential workers could lose their jobs, how safe was I? That was when the truth became uncomfortably real, your job is not guaranteed.
“ If these other essential workers could lose their jobs, how safe was I? That was when the truth became uncomfortably real, your job is not guaranteed. ”
If no job is guaranteed, then neither is the income earned from that job. How can one insulate them-self from job loss? Saving a lot is one option, the other is income diversification.
What is income diversification?
What if you lost your job for a reason that prevents you from finding another job? Legal dispute, malpractice, injury, illness, recession? How would you maintain your lifestyle, or your family’s current quality of life? Income diversification protects you! Income diversification refers to having multiple streams of income. This is a safe guard against losing your job and the stream of income it generates.
Having multiple streams of income not only helps to reduce the risk of losing all of your income at once, but also helps you to grow your wealth and savings at a faster rate. If you lose your job and the associated income, having additional income sources will help to stretch your savings. You may even be able to cover your expenses all together until you find a new job and preserve your savings altogether. You can grow your wealth and savings faster because your monthly income increases.
How do you diversify?
How do you build multiple streams of income? You can have multiple jobs, businesses or my personal favorite investments. To understand why I prefer investments, let’s take a look at the first two options - multiple jobs or businesses.
You want to make more money so you work more. Either more hours at the same job or you get a second job or business and work more hours there. Now you're spending more time at work instead of with your family or pursuing your hobbies or passions. You are working on-call when you would rather be working on your tan. But that’s ok. The reason you’re working more is so you can spend more hours enjoying your job rather than the benefits of the income it provides – right? I didn’t think so.
“Imagine, what lifestyle could you live if your income improved but you could work less? ”
Diversifying your income with income producing investments, such as real estate, allow you to earn more income while maintaining your current work hours or even working less. How? Well, through investing, you are letting your money work more for you instead of you working more for your money. Imagine, what lifestyle could you live if your income improved but you could work less?
How to diversify with real estate syndications
Not all investments generate income. Most investments are bought for appreciation, preventing you from enjoying your profits until they are sold. There are even less investments that can generate multiple streams of income. Investments in real estate syndications help you to generate 6 streams of income at once.
“Investing in multifamily apartment communities gives you the ultimate income diversification as you can create 6 different streams of income from on investment.”
Real estate syndications are team-based investments that allow active and passive investors to pool together funds and resources to acquire and invest in multifamily apartment communities. These investments allow you to earn income on a monthly or quarterly basis. Investing in multifamily apartment communities gives you the ultimate income diversification as you can create 6 different streams of income from one investment. You can take your diversification to the next level by investing with different partners or in different real estate markets. This helps to spread risk so that if one market or investment has an adverse event it may be offset by other investments.
Income diversification vs Diversification vs Asset Allocation
Diversification traditionally refers to investing in a variety of different asset classes such as real estate, stocks, precious metals etc and the variety of investments you have within each asset class. To be clear, when we discuss income diversification, we are solely referring to investments that are made with the intention of replacing or augmenting your current income. Allocation refers to how much you have invested within each asset.
“Income diversification, [refers] to investments that are made with the intention of replacing or augmenting your current income”
Diversify like your life depends on it
While you may be grieving the realization that job security is a myth, hopefully you have learned this lesson early. Take advantage of your head start. We can’t predict the future but we can do our best to prepare. Diversify like your life depends on it, because your quality of life does!