This pandemic has played havoc in our lives. In a way, it has challenged the status quo of taking our lives for granted. Personally, this has been a much-needed wakeup call for me to change.
If you are in the same situation as me, hopefully, this post will help you take the required steps, to secure financial independence, manage your money by implementing a family budget.
So, by profession, I work as an IT consultant. I have joined this company in May 2007 and it’s been 13 years and 2 months that I have worked there.
I have lost my job this year due to the pandemic, when I was made redundant, for a month, I was confused, betrayed and angry.
I guess if you work for a company that long you tend to forget that you are also a removable liability for the company.
I am the only breadwinner at home, it has hit me at the core. This has forced us to scrape every dollar we can. We have either sold unused stuff at home or have cut down on our non-essential services.
This redundancy has given me a shock to my system, a system that has been on autopilot and taking life for granted.
A system that was well designed to work for an employer but has never taken the time or thought to learn and achieve financial security and independence.
My work has always been busy, I was mostly doing 60-hour weeks depending on the customer I was servicing. Also, there is no good excuse for anyone not to work towards their financial independence.
In a way, I am grateful for this pandemic. This has allowed me to pause, review my life, and reorganize priorities.
A needed break to validate my financial security for a future-self.
When I joined the company, the salary was good enough to survive.
As my position grew and the salary increased, my lifestyle has inflated to reflect my salary.
I neither had a family budget nor a financial goal, motivating me to manage my finances.
This inflated lifestyle has left me little or no money to invest. We were consciously aware of inflation in some areas of our life, but most parts of the inflation happened unconsciously.
I would subscribe to monthly services that were required then and there but wouldn’t review the necessity and unsubscribe.
2. Funding my wants.
When you get busy with work and life, especially when life is on autopilot, the line between need and want becomes blurred.
I was too busy/lazy to think through if an expense is a want/need, it was brain hurting to evaluate the paradox of choices. The easier route has always been to pay it off.
On hindsight, I feel the mantra that spoiled me is ” I work so hard and I deserve it”.
I believed in it so much that I bought a brand new expensive car a year back, and I am still paying the loan repayments.
Yes, we all deserve to enjoy our lives, after all, what’s the point in saving till death.
Now, I learnt that we should fund all our wants or at least most of our wants through passive income not using active income( hard money earned with the direct exchange of time).
3. Income Protection Insurance
For 13 years in the company, I had a competitive skill set, up to date with new technology, good client feedback and a history of work to brag about.
I always felt that they need me more than I need them, and so was bloated feedback from my managers. This false prejudice and ego made me work harder and harder for them, committing family and personal time.
I felt so safe and secure that I didn’t even bother to have income protection insurance.
4. Multiple income streams
All along my job was the only source of income. It was like investing all your savings into one stock.
At least there is a slight probability in your favour if you were to invest all your savings into one stock.
But when it comes to income, whether the income is from a job or a passive income, it’s never a wise idea to have all the income from one source.
I am reaping the detriment of not following this financial lesson. I wish if there were alternative incomes, an income that would sustain me during this time.
5. The flywheel concept
The resistance of a flywheel is inversely proportionate to the speed of the wheel at which it’s rotating. The faster the rotation, the lower the resistance it will experience.
Push with great effort the flywheel inches forward, it takes consistent effort to gain momentum.
The key is to produce content consistently, to surpass the resistance threshold. The challenge with generating passive income, especially in the creative world, is that you need to put a lot of grinds before you see the result.
Looking at the short term, I would be demotivated and discouraged to pursue your goal.
I wish I had pursued those smaller projects/ideas consistently today like I have started the blog ten years back and never produce enough content to gain momentum.
When I lost my job, I was in a state of distressed and unhappy, but now I feel glad that it has happened, a blessing in disguise.
It would have been a very bad financial situation if I were to realize this close to my retirement. I still have some time to minimize the impact.
Firstly, I will have a family budget (using a custom 50/30/20 rule) aiming to save money.
My goal would be to spend less than I earn and aim to fund all (most) of my wants from the right income source.
Secondly, I will work consistently to generate passive income. I know it will take a long time before I see the results, but will aim not to sidetrack.
Thirdly, I will get proper insurance covering all areas of my life right from income, health, life etc.
I am hoping that my experience has added some value in your journey to financial independence.
Thanks for reading!