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Financial Freedom: Work

This is the third post in a series about aspiring to Bumhood—that is, achieving financial freedom so you can get off the day-job treadmill and gain control over the way you spend your life. Today let’s talk about gainful employment.

One of my editors at Arizona Highways told me about the anguish he felt during a three- or four-month period of unemployment after he’d been laid off a job. His wife earned a good salary, so it wasn’t that they didn’t have enough to live on. But he felt devalued as a human being. The words he used—I remember them to this day—were “If you don’t have a job, you’re nothing.”

Well, no.

Paid work exists for one reason and one reason only: to put food on the table and a roof over your head. You are not your job!

Some of us feel a calling for certain kinds of work. From the time I was about six years old, I wanted to be an academic, for example (having no clue what that really meant); my ex- always wanted to be a lawyer. Many of these callings are none too profitable: teaching, for example, is poorly paid in relation to the actual number of hours a good teacher puts into the job, and I don’t imagine many clergy or social workers earn much. Some of us still have no idea what we want to do when we grow up, and so have to take whatever job comes along.

Truth to tell, unless we fall into a large inheritance or win the lottery, to achieve financial independence most of us will have to pass part of our adult lives in a day job. We need to earn enough to provide for our children and to establish our own permanent financial security. This will likely entail holding a job for at least 15 or 20 years while at the same time practicing some basic money management.

So…what to do to make a living? Whatever brings in some cash.

Do you need to earn a six-figure income to break free from wage slavery? I don’t think so. Certainly SDXB did not: he was a reporter, and although The Arizona Republic paid a decent wage compared to other publications in this right-to-work state, it still wasn’t great. The period in which he made good pay as a freelance PR man was brief, during the bubble that occurred right before the savings and loan crash, which led to a recession almost on a par with the one we’re seeing now. But he did have an income, and by dint of frugal living and steady investment, he managed to step off the treadmill at 47.

Similarly, the Adirondack Chimney Sweep passed most of his adult life in modestly paid work, but because he lived within his means and had built a small sideline, when the city offered him a buyout long before he’d reached retirement age, he was in a position to accept. A friend of mine cleaned carpets for a living. He retired a millionaire, gave the business to his son, built a beautiful house in the woods, and went fishing.

I believe if you live sensibly, stay out of debt, save regularly, and invest your savings, you can build financial freedom no matter what you earn. I know a corporate lawyer who earns a fine income, but because he never put a high priority on managing his money, he’s still trudging to an office every day—and he’ll be 70 next fall. Others who have held lower-paying jobs as teachers, tradesmen, nurses, or, like my father, merchant seamen have been able to quit working altogether or to start new careers that pay less or interest them more.

There are three tricks to converting a job, any job, into financial independence:

1. Live below your means.
2. Develop more than one income stream.
3. Save and invest all funds not needed to cover living expenses.

Living below your means is going “live within your means” one better: the trick here is to stay out of debt and to live sensibly enough that you don’t spend all your income. Then use your unspent income to build savings. If you have a 401(k) or 403(b) to which your employer is contributing, be sure to take advantage of that. But save more, above and beyond pre-tax contributions from your salary.

As part of his strategy to quit his job at the earliest possible moment, my father never went into debt. Any debt. All the time I was growing up, we lived in rentals. He didn’t buy a house until he had the cash to pay for it in full. Now…he had some ugly reasons for this that had nothing to do with personal finance—I’m not giving his bigoted thinking enough credit to describe it here, except to say it was a symptom of the times in which he grew up—but the practical effect was that all the money that might have gone into house maintenance and mortgage insurance went into his savings, which he invested for the long term. The less debt you carry, so-called “good” debt included, the more you can save.

From my own experience, I can see that having a side income stream is crucial, especially if your day job is modestly paid. Teaching on the side allowed me to pay off the second mortgage on my home a year before the Great Desert University canned me. And, when my beloved employer kindly delivered six months’ notice that my office was to be shut down and I and all my staff thrown into the street, I landed a noonlighting job that allowed me to rack up a $10,000 cushion. It will keep the wolf from the door during this difficult 2010, when Social Security rules will bar me from earning more than a subsistence wage.

I feel extremely lucky (or maybe smart?) that over the years I’ve developed more than one set of marketable skills: I write, I edit, and I teach. Today the three of those allow me to earn salaried income and self-employed income: blogging, freelance editing, and part-time teaching in the community colleges. These will carry me over the period required for my investments to recover the $180,000 lost in the crash of the Bush economy.

At this point, I’m free of the day job, light part-time work will support me without having to draw down my savings, and I have enough independent income to deal with the other baleful result of the late, great economic mirage, an upside-down mortgage on a house my son and I mistakenly thought had fallen in value as far as it would fall at the time we bought it.

Things could be better: to be fully confident of having enough to carry me through old age, I would have preferred to work, save, and invest for another five or six years. But because I’ve lived below my means, invested everything in sight, and cranked extra money on the side, I’m far better off than most single women my age, and I’m clearly in a position to enjoy life without ever having to take on another full-time job.

Financial Freedom

An Overview
Education
Work
Debt
The health insurance hurdle
The roof over your head