Part1: A Combination of Circumstances

I’ve been blogging about the Gig Economy for over three years now and it was brought to my attention that I’ve never shared how I joined the Gig Economy. Well, it certainly didn’t happen overnight. It was a process that took several years, actually.

Leaving a steady job is not for everyone. For some people the security of a 9-5 job with steady income, benefits, and in some cases even a pension, is too great. While income levels are typically much higher when self-employed, much of this benefit is wiped out when those benefits are subtracted from that income. Therefore, the financial aspect of leaving needs careful planning.

A financial plan for leaving requires two important ingredients:

1. A Perfect Combination of Circumstances

2. and Long-Term Planning.

This is not to say that leaving a steady job is impossible without these, but it will be more difficult. In this article, I will talk about the Combination of Circumstances that create the possibility to leave that job.

Now I understand not everyone will have these two things if they are suddenly laid off or suffer an injury/illness that keeps them from working. This does not mean that the Gig Economy is closed to them. It just means that the timeline is accelerated for them and that they may need to prepare for the Gig Economy after leaving the steady job.

My own situation was a bit in-between; it was both planned and rushed. As a result, I didn’t see real meaningful income until well after I left my secure job. Financial success is still possible, but it will just take longer to get there if you are forced out of your job before you are completely ready.

Regardless of your particular situation, I am writing this article to share what things worked for me and how they contributed to my success today. Some of my circumstances are unique, but I’ll share how those can still be replicated with some careful discipline. So, let’s get started.

Life Events that Deeply Influenced Me

1.       Being an immigrant

I’m sure you’ve heard this before, but immigrants, especially those who come here with limited means tend to have extra grit. They come here with the American Dream front & center in mind. While this is probably more fantasy than truth, the statistics do suggest that being an immigrant matters.

When I came to the United States as a child, I didn’t speak a word of English. School was extremely hard, I was bullied, and even after being here for several years I still had a hard time with typical American ways. I didn’t understand how to properly make small talk, tell jokes, play sports, and enjoy American pastimes.

Instead of trying to fit in too hard, I focused on my studies. I took bad jobs where I performed tasks most people wouldn’t. I was willing to work for lower wages and I never asked for a raise. If you are also an immigrant, you know about this behavior as well. Some of us do it because we are afraid to be sent back to where we came from, and even if we have legal status, we still put up with it because we don’t want to fail.

As a result, I became very good at my jobs, I was never fired, and I quickly found out the importance of earning an income, even if it was meager. I became the one employee who would go the extra distance, worked on holidays, and knew where everything was. That was one thing I was always good at, I knew where everything was; I had an uncanny ability to memorize details and if I couldn’t get it for you, I knew who could. I became an indispensable employee.

Now, for those who aren’t immigrants, there is absolutely no reason you can’t do this as well. Sure, it’s easy if you have a rough start but with some discipline, you can also do this. You don’t need to be an immigrant to study hard. You don’t need to speak another language to just quietly work rather than chat everyone up at work. Instead of joining the office fantasy football pool, you could spend time becoming an expert at an indispensable task. You want to become that indispensable employee.

2.       Job Insecurity

I’ll admit that my work ethic was nothing compared to my father’s. He worked even harder than I ever did, no matter what he worked on. To say he was my role model would be an understatement. So, when he was laid off from a steady job after decades of loyal service, it was difficult for me to see how he was treated. It was nothing he did, either; he was just in an engineering field that was being changed by automation.

Despite the setback, he immediately reapplied to other companies. In the meantime, he tried several ways to build his own business. Those were extremely hard times. We almost lost the house, I was forced to drop out of college, and it became likely we may even have to return to our home country. Fortunately, he did eventually find a new job with an even better company, but the experience left a deep impression on all of us.

I was in my first year of college at the time but I refused to drop out. From that day forward, I paid my own way. It wasn’t easy – I won’t go into what I did to get by, but I was determined to stay in college and in the US. It was during this time that I became very aware of the power of money, credit, and debt. You could say that my previous school experiences, as bad as they were, had been critical in giving me the resilience to get through this time of my life.

I also came to understand that no matter how invaluable of an employee we think we may be, there is no guarantee that the job will always be there. Industries change, technical skills become obsolete, and even savings for a rainy day can disappear fast. It was during this time that I started investing and using credit and debt to my advantage.

One thing I have done since that time is to put money aside. I did this no matter how little it was or how dire my situation was. If I received a bonus or other windfall, some of that would go into my savings. Again, this is familiar territory to immigrants. Job insecurity creates the need to always put money aside and we do this because there is a constant sense that our good fortune could change no matter how hard we work at preventing it. Too many things in life are out of our control, so we plan ahead.

This doesn’t mean that you need to be an immigrant to put money aside. It’s not about how much you put aside, as long as you get into the habit of doing it. Do it with every windfall, large or small. Yes, when you clip that coupon from Bed Bath & Beyond, that’s a windfall, and some of it should go into your savings. Remember, it is not the amount but the habit that matters.

I know that for many people the money doesn’t seem to be there because bills seem to use everything up. If so, then you may be living beyond your means. With very few exceptions, you can do with a little less. Here in the US, we live in the wealthiest nation in the world, so I can’t accept that we can’t trim a little. Even if it’s just pennies of every dollar, over time, this will make a difference.

3.       Investing

It was also at this time that I started investing. Instead of buying a car or nice clothes, I bought stocks with any extra money I had. Every stock I purchased I did with the full understanding that I could lose it all, so it was always money that I had to lose. I did my research, so I became very good at investing. If my investments generated a big windfall, I reinvested it all – I never spent it.

Just as with the habit of putting money aside, investing also must become a habit. I know it sounds counter-productive, but this is when to begin behaving in a way that you would if you had far more, that is, as if you were a bigger investor than you really are. There is no reason not to follow the lead of well-known investors – you just need to do it on a smaller scale. If Warren Buffet buys a bazillion shares of Unilever, you buy 5 shares, and so on.

How else will you become better off if you don’t learn to behave as if you are a big investor? With both savings and investing, it’s not about the amounts, it’s about the habit. One day in the future, the habits you form now will also amount to a bazillion shares, so get into the habit. When you do become a bigger investor, the process will come easy to you because you will have been doing this since you were collecting Bed Bath & Beyond coupons.

Discipline is nothing more than learned behavior and it can be learned at any income level.

Why These Habits Matter

So why am I talking about saving and investing in a blog post about leaving your 9-5 job? I am talking about this because I’m talking about habits. These are habits you need to start while you are working your current steady job. These habits will make it possible one day for you to join the gig economy.

I am presuming that if you planned your exit from the workforce carefully, you are leaving that job on your own terms. This will mean that you will leave with some sort of severance package. This severance should cover you living expenses and you can keep your savings for other things. This would be the ideal situation.

You should avoid using the money that you will have stashed away for all those years for your living expenses. You should instead use it for your business startup expenses. Yes, if you are not getting a severance package, then you will need to dip into your savings, but ideally that won’t be the case. Whether you are purchasing a franchise or building things up from scratch, you need startup cash for parts, shipping, supplies, computers, cell phone plans, printing, etc.… That is what this savings account was for: an investment into your business.

Any funds that you don’t need right away should remain invested as long as possible as they will continue to grow for you. They can serve as a cushion, but more importantly, they helped you build a habit of investing. From this point on, instead of investing in other companies, you will also be investing in your own company.

Which brings us to another very important detail. The money that will cover the startup expenses are tax deductible. Unlike previously, when you were investing after-tax money (funds you had already paid taxes on), these expenses can all become tax deductions. Now I’m not giving tax advice here, but a good tax advisor can help you make the right decisions here, so seek out some help with this. By the way, a good tax advisor’s fees are also deductible, but I digress…

If you implement these habits well before you actually do leave your 9-5 job, making the switch should be possible. Even if you suddenly find yourself out of work, if you’ve implemented a sound saving and investment strategy over the years that you were employed, you will be in a much better place now that you need to start your own business. You can pat yourself on the back for planning this out so well.

Conclusion

Not everyone is an immigrant and not everyone has these same experiences. Some people may not ever know hardship at all. For these people learning new behaviors will be harder. The key is that they are all learned behaviors and as such anyone can learn them.

Leaving a 9-5 job and joining the gig economy is different for everyone, some struggle more than others. Everyone has a different set of circumstances to get there. However, anyone can get there. A sobering point is that hardship helps level the playing field a bit in contrast to those who haven’t struggled as much. That said, anyone can learn the right habits to help them succeed.

In either case, the results are the same: financial independence. I really do believe that anyone can make it on their own. Not everyone will want to do it, and that’s fine, but for those who do, it’s the learned habits that are the most important factor for success.

 

In the next issue, I will talk about the second part of leaving a job and transitioning to the gig economy: Long Term Planning. This article talked about how to set aside the funds you need, so next we need to determine how long this will take and how much you should have before making the jump.