Never Retire - Defending Against Reduced Or A Loss Of Income
There’s actually a three-pronged approach to preparing yourself, then dealing with reduced or a loss of income. Not only, but particularly if you’re a freelancer or other small business owner who experiences income fluctuation and other frequent, though hopefully not unexpected shifts.
In the last installment of the Never Retire newsletter, I detail how I budget my money and allocate cash from my three relatively modest streams of freelance income. That post closed with my rationale, some perspective, and a few items purposely left hanging—
I like installments like this because, while the strategy and specific methods I use to execute it are simple and straightforward, they’re still critical.
This is how I create structure and certainty around my personal finance. This structure—coupled with a low cost of living—helps modest income go a relatively long way now and going forward.
It’s how I ensure I stay on track—in the near- and long-term term—by turning my thoughts into practical action.
And it’s how I vision and remain confident in the long-term sustainability of my Never Retire approach.
And, most importantly, I hope you can take these types of newsletter installments, run with them, and adapt them to your specific situation.
The next two big steps as I enter relative old age—
Eliminate that fucking car payment
Eliminate my housing payment (or cover it with additional income)
I will write about both of these points in the coming months.
I will also discuss how I consider the prospect of losing income or running into a bad month or series of bad months. It has happened and it will, undoubtedly, happen again.
In today’s installment, we discuss what was purposely left hanging to comprise the three-pronged approach.
#1 Never accept the so-called cost of doing the business of life.
One of the biggest factors that gets people in trouble with money is throwing their hands up in the air and lamenting how much stuff costs. As if there’s no alternative approach.
The flabbergasted, lamenting crowd tends to externalize and/or blame the universe for everything that happens to them.
As my late Little League Baseball coach, Mr. Teaman used to say—
Play the ball, don’t let the ball play you.
Inflation. High rents. Record housing prices. They exist. However, they don’t control you or your money. There’s almost always a way around, particularly if you make decent or better money and have the luxury of choice.
You can look at the record median price of an apartment in your city and throw your hands up in the air, helplessly submitting yourself to pay that price or higher to get what you apparently want. Or you can adjust your expectations and avoid biting off more than you can chew financially.
This is how you give yourself the luxury of choice. To, as Bruce Springsteen recently said—
Happen to the world, not let the world happen to you.
By resisting the urge to prioritize the size of your dwelling over the cost, you set yourself up to handle reduced income—especially if it’s unexpected—way better than you otherwise would.
Just by taking the apartment that costs $500 less, but doesn’t have outdoor space or an extra room for a home office, you put yourself into a position to better absorb the hit.
By the end of the month, you have to make that housing payment. The sooner in the month you have earned the money to cover that housing payment, the better.
Seems painfully basic, yet millions exist who treat their preferences and expectations like they’re necessities.
As if they’re the cost of doing the business of life.
They’re not, particularly if you’re of modest means and value the ability to save and do other things over pay more than necessary for housing.
#2 Make practical cuts. Fix your mistakes. Maintain or reduce going forward.
That said, we all make mistakes.
A few years ago when I needed a car, I went through the motions. I didn’t think twice. I accepted the going rate of a $350 car payment for a standard car—Hyundai Elantra as it ended up—walked into the dealership, pointed to the one I wanted, and signed the papers on a lease.
Horrible move.
Lease expired and I took a loan to buy the car. Now I still have a car payment.
What I should have done is purchased somebody else’s car at the end of their lease.
Had I made this more financially prudent choice, today—
I would still have what I have today—a used car. (It’s incredible how quickly new cars become used!).
However, I would not have one other, more important thing that I still have today—a car payment.
I have stopped kicking myself over this. For the most part.
When I pay off my car—hopefully ahead of schedule—I’m done. Never taking on a car payment again. A car payment is not the cost of doing the business of life. My bad for just accepting that it was when I signed the papers for that brand new, now very used Hyundai Elantra.
If a car payment is a constant in your life—and it is for untold numbers of people, especially those who succumb to leasing—you’re really throwing money away. Here again, it comes down to personal choice and what you really want more when you have to budget your money.
Once the car payment’s gone, it’s time to focus squarely on the housing payment.
For my partner and I, the process looks like this—
Independent of one another, we both purposefully found killer deals on rent several years ago.
Now, together for nearly two years, we decided to move in together. We moved into her place, effectively cutting each of our housing expenses in half. None of this, but it would never be our place or we need a second bathroom or bedroom for a home office bullshit. It feels like our place (because we enjoy being around one another so much and she’s fucking awesome!) and my laptop works just fine on the kitchen table or couch and on the bed (because I am not a work from home diva!).
Next step—eliminate that housing payment, one way or the other, in the next few years. I have written about how we might do that previously and will reiterate/update those plans in the coming weeks.
Actually, that link needs an update with some different thinking/adjustments to our plans. So expect it to come soon! It’s a work/vision in progress that’s instructive for me—and I hope you—within a Never Retire context.
Your situation might be technically different, however the same or similar principles apply.
Maybe you just need to focus on paying off your mortgage to ease your monthly burden headed into relative old age. Maybe you, like my partner and I, need to consider moving at some point in the future for cheaper rent or the ability to pay cash for a place to live.
Whatever the scenario, it’s all about finding a way to reduce/eliminate your biggest expenses and doing everything you can to maintain that new, more comfortable baseline.
My biggest contribution to our apartment—plants!
#3 Have at least one, preferably two or three plan Bs in your pocket.
If you freelance or own a small business and can’t or don’t want to traditionally retire, this is paramount.
Even better if you live by points #1 and #2 because your plan B doesn’t or will not need to be super financially lucrative.
It’s really cool to see my girlfriend thinking about and laying the groundwork for how she’ll make a little bit of money as we enter relative old age together. That’s her personal business so I won’t get into it, but it really makes for an ideal, if not exciting and inspiring example.
And it comes down to being creative.
How can you take what you have going for you now—be it your skills, connections, interests, internal and external circumstances/advantages—and parlay these things into a future source of decent or better cash flow you don’t have to work too hard for?
For me, I’ll keep doing what I’m doing, but on a smaller scale. So, keep writing this newsletter (I don’t think I’ll ever quit), keep writing on Medium (same), and stop doing private client work.
But what if, say, Medium goes away or the newsletter stops adding subscribers?
See what I did there?
But, in all seriousness, it’s a consideration I make. It’s one you have to make within the context and confines of your personal and professional situation.
Luckily, I have been doing what I do for more than a decade. And there always seems to be work, thanks, in part, to my longevity in the business. So opportunities frequently come up.
Maybe somebody asks me to do something. I say yes or no.
Each no gets put on a mental list of something I might go back to.
Remember when you asked me to do X and I said no, well, I have time now and would like to do it if it’s still available.
I have secured work this way at least six times in the last 12 years.
Maybe I come across work—on social media, through word of mouth, whatever—go for it and don’t get it. Or I decide not to go for it.
These opportunities also go on the mental list.
When I need the work, I hit these resources up. More often than not, one of them comes through or one of them points me to somebody else who comes through.
Again, seemingly basic, but lots of people wait until they lose their job (or work) to get the next one (or more).
One thing I learned, starting 30 years ago (wow!), when I worked in the volatile radio industry. Always be looking for a new job, even if you don’t need one. This is the best way to increase your income and almost immediately land upright after a loss.
As I wrote this, I started sketching the next installment. And it will be on ways to get rid of that personal financial ball and chain known as your housing payment.
We’ll use an update the plans and thinking my partner and I have been doing to illustrate things.
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There’s also academic research on retirement/working in retirement and practical ways to budget and plan for relative old age when you’ll Never Retire to get to.