Diversify - Bro

Sis and I are still working on this blog. We just had a life get in the way last week. We still strive for a weekly post but sometimes life just happens. Thanks for sticking with us.

The number one financial fear I have is that I will lose my job. This does not need to be because I suck at my job or because I am dumb enough to tell someone important (customer or boss) what I really think. I could get “laid off” due to a business downturn, someone else in my company doing something wrong, or just plain politics. Life is simply not safe and that includes your job.

Being an engineer I can't just leave an obvious problem alone. I happen to like to be able to shop at the grocery store and not worry about food prices or have to track the price of gas (I now drive an electric car but you get the point). The solution: diversify. Diversifying is the act of not putting all of your eggs in one basket. It is having a plan B, C, D, and E. When applied to the real risk of losing your job it can point to some obvious but important solutions.

Job security is basically how deep your hooks are in your employer. As an an employee it is important not to just get stuck in one department doing one task. If that department or task ever gets made obsolete then you are out of a job. Instead it is to better to specialize in “your” job (specialization in economics leads to greater gains) but to also try new things and apply yourself in new areas. For example if you are an expert in a certain product line it is important that you work hard on your product but it is also wise to take a little bit of time to get to know the other products your company sells and possibly pick up auxiliary jobs such as sales, computer maintenance, or purchasing. Having a diverse background can allow you to pivot into another position if needed or can help provide new skills that can be translated to a new job.

Having all of your income come from one job is risky, even if you have diverse skills and work hard. Shit just happens. Diversity would dictate it is much safer to have different sources of income. The logic is if you lose your job then the other sources of income could help you make ends meet for a temporary time period or permanently. Diversity could come from both spouses working, a side hustle, or investments. In my case my wife is a full time mom (she has the harder job) so we have no diversity there. A side hustle could be something as simple as mechanical turk or swagbucks or as complex as running a small business nights and weekends. The benefit of a side hustle is the income is not dependant on your day job. If something happens to your day job you can still bring in money. Investments come in all shapes and sizes but in general you exchange money for the hope of more money down the road. I invest in index funds. If I put $1,000 in the S&P 500 then I get a dividend check every 3 months for about $5. This does not sound like much but if I manage to grow my S&P holding to $1 Million dollars then my quarterly check would be about $5,000. That kind of money goes a long way to paying the bills.

Diversity is one of the most important ways to help reduce risk. Risk is necessary in life but I am very risk adverse. I plan on doing all that I can in order to reduce financial risk so that I can be free to take risks in other areas of my life.

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