There’s No Such Thing as Job Security
Growing up, my highly educated, but poor dad was very concerned about a steady paycheck, benefits, and job security. That’s why he was a well-paid government official, the head of education for the State of Hawaii.
My uneducated rich dad, my friend’s father, offered very different advice…
“Go to school, graduate, build businesses, and become a successful investor.” He taught me that while the poor are the victims of money, the middle class are prisoners of money.
In describing the middle class, rich dad said, “Instead of solving the money problem, they think they can outsmart their money problems. The middle class will spend money to go to school, so they can get a secure job. Most are smart enough to earn money and put up a ﬁrewall, a buﬀer zone, between them and their money problems. They buy a house, commute to work, play it safe, climb the corporate ladder, and save for retirement by buying stocks, bonds, and mutual funds. They believe their academic or professional education is enough to insulate them from the cruel, harsh world of money.”
“At the age of ﬁfty,” said rich dad, “many middle-aged people discover that they are a prisoner in their own oﬃce. Many are valued employees. They have experience. They earn enough money and have enough job security. Yet deep down they know they are trapped ﬁnancially, and they lack the ﬁnancial intelligence to escape from their oﬃce prison. They look forward to surviving ﬁfteen more years when, at age sixty-ﬁve, they can retire and then begin to live — on a leaner budget, of course.”
Most likely you were told the same advice I received from my poor dad: that the road to a secure financial future is to go to a good school and get a good job.
The problem is that advice is not only bad but also financially dangerous.
The Good Grades, Good Job Myth
To those who are just now graduating from college, and who probably worked hard to get good grades so that they could get a good job, I want to wish you congratulations. I also want to offer some free advice. Don’t bank your financial future on working for someone else.
Today many people have gotten good grades, but there are fewer and fewer safe, secure jobs, and even fewer with benefits like pensions. Many people, even those with good grades, need to “mind their own business” and not just look for a job where they will mind someone else’s business.
I can understand the allure of what appears to be security, but as you see from the executives of our biggest companies, there is no job security. Instead, you need to learn to make your own way in the world.
Naturally, you might view this as a risky way, but it’s not.
The Real Risky Side
The CASHFLOW Quadrant is a simple diagram I use to teach people about how wealth is generated (and lost) in today’s world of money.
On the left side of the quadrant, are employees and the self-employed (those who sell their time and skills like consultants). On the right side are business owners and investors.
Those on the left side of the quadrant are at the most risk because they have no control and lose the most money to taxes and inflation. Those on the right, even though they are traditionally viewed as the riskiest, are the most secure because they do have control and can use taxes and inflation to their advantage.
I still have some friends who seek security as employees or self-employed, the left side of the CASHFLOW Quadrant. As mentioned, I believe that this side of the quadrant is the riskiest. If people could see what I see when I travel the world, they would not be looking for more security.
Security is a myth.
The trajectory for employees’ incomes is not good. And when there are bad economic times, it’s the employees who lose their job, not the business owners. Learn something new, and take on this brave new world. Don’t hide from it.
It’s also risky for the self-employed. If they get sick or injured, their income is directly impacted. As I get older, I meet more self-employed people my age who are physically, mentally and emotionally burned out from hard work. The more fatigue a person endures, the less secure they become, and the risk of having an accident also goes up.
As the march of technology like automation continues at an ever-increasing pace, employees and the self-employed have to constantly be trained to keep up and stay relevant in the job market. My thoughts have been, if you’re going to reeducate anyway, why not spend some time educating yourself on the skills needed to become a business owner or investor — the right side of the CASHFLOW Quadrant.
The Secure Side
The irony is that life on the right side of the Quadrant, the one viewed by most people as riskier, is more secure.
For example, if you have a secure system that produces more and more money with less and less work, then you don’t need a job or need to worry about losing your job. To make more money, you simply expand the system and hire more people. That allows you to expand your means so that you can enjoy all that life has to offer.
People who are high-level investors aren’t concerned about the market going up or down because their knowledge allows them to make money in either situation. If there are market crashes for the foreseeable future, which I believe there will be, many baby boomers will panic and lose much of the money they had for retirement. If that happens in their old age, instead of retiring, they’ll have to work for as long as they can. How is that security?
Professional investors are people who risk little of their own money and yet still make the highest returns. The people who know little about investing take the risks and earn the least return. From my point of view, all the risk is on the left side of the CASHFLOW Quadrant.
Avoiding One of Life’s Biggest Traps
The primary reason the majority of the poor and middle class say they are fiscally conservative — which means, “I can’t afford to take risks” — is that they have no financial foundation. They have to cling to their jobs and play it safe.
During the pandemic, millions of people found out the hard way when companies were forced to downsize. Without job security, they had nothing to fall back on. What they thought were assets could not help them survive in a time of financial crisis.
If you want to learn how to move from the left side of the CASHFLOW Quadrant to the right side, today is the day to start. Increase your financial education, expand your mindset, and see the opportunities before you. Start investing in your financial security today.
Editor, Rich Dad Poor Dad Daily