Job Security is a myth. The Wall Street Journal published an article called The End of Employees that proved how job security does not equal financial security. Instead, a job typically pays you just enough to stay but never enough to leave. Rather than security, it creates dependency upon one, very risky, form of income. I experienced this reality myself. I was an engineer and my boss and mentor, who was world renowned and created millions of dollars for our company, was laid off. He didn’t even see it coming. The intention of the owners of the company was to replace him with me at a lower salary. I must admit this was my dream job. However, I didn’t take it because I figured if my world-renowned mentor is expendable, then so am I!
Commercial Real Estate Provides Financial Security
Don't be lulled to sleep trusting in the myth of job security but instead create a secure income by investing in Commercial Real Estate. I'm going to share with you how you can take your job, whatever it is, high or low paying, and purchase commercial real estate. I'd like to take you on a journey of simple math. Below I have two example situations to demonstrate the difference commercial real estate investing can make in creating a more financially secure future.
Situation 1: Job Only
Income: This person has a salary of $84,000 a year or $7,000 a month.
Living Expenses: He spends $5,000 a month to live. This includes mortgage or rent, groceries and bills, allowing him to save $2,000 a month.
Savings: He has been able to save $20,000.
Unfortunately, he loses his job. This isn’t unusual, it happens to everyone. The concern is, how long will he survive without a job?
Time Living off Savings: 4 months. He has $20,000 saved up, so he can pay his $5,000 a month in living expenses for four months before running out of money.
What is his frame of mine? Panic. He has four months to do something. Is that enough time to find another job, maybe go back to school or do something else? The fact is it’s not.
Situation 2: Job Plus Two Years Investing in Commercial Real Estate
Now, let's look at this person that has a job and has been working with us for two years.
Income: They have the same income of $84,000 a year or $7,000 per month.
Living Expenses: These are the same as well at $5,000 a month.
Savings: They have also saved up $20,000. However, this person purchased two 12-unit apartment buildings where for the past two years the total cash flow for both properties is $4,000 a month. I'm being conservative here.
Again, unfortunately this person loses his job. How long will he survive without a job?
Time Living off Savings: 20 months, as opposed to four months. Let me explain why. If they lose their job, they must start living off savings and their investment income of $4,000 a month.
Monthly Living expenses: $5,000
Monthly Cashflow: $4,000
Savings: $ 20,000
Using their savings to pay the monthly deficit, they have 20 months until they run out of money.
What is this person's frame of mind? They are calm because their future is secure. Twenty months gives the person who's been investing in commercial real estate for two years, one of our students, time to figure out what they’re going to do. For instance, they are free to go back to school, maybe do commercial real estate full time, or explore another career path. They don’t have to panic because they have time and options.
3 Tips to Financial Security
Here are three quick tips to get you started so you can be secure and not put your trust in the myth of job security.
Tip #1: Don’t Put All Your Eggs in One Basket
Don't rely solely on one good paying job or average paying job to secure your financial future. This applies to high earners as well. It is such a tendency of people who make a lot of money to think that they're secure in their high paying job. As a result, they get lulled to sleep with the money they're making and then, at 40, 50, 60 years of age, something happens. Don’t get lulled to sleep and then get the shock of your life. Don’t spend all your energies on building a company that doesn’t care about you.
Tip #2: Invest in Commercial Real Estate
You need to diversify your income producing activities. Your first activity may be a job. Your second activity should be investing in commercial real estate. Have other people with jobs pay your mortgage by investing in an apartment building. For example, if you purchase a 12-unit apartment complex, you then have a property occupied by renters with 12 jobs paying your mortgage, insurance, taxes and the repairs to the property. More importantly, it will also provide you with cashflow.
Tip #3: Plan for the Inevitable
What is the inevitable? The inevitable is when you get downsized, or laid off or fired. You need a plan of action in case something happens to you or something happens to your company. What’s the plan? The plan is to buy commercial real estate so you have something to fall back on. If you need help in developing that plan from scratch, give us a call and we'd be happy to walk you through some of the possibilities for your situation.
Some of you already have retirement funds, 401K, self-directed IRA, and pensions. I have a video called, How to Maximize your Retirement Investments which will show you how to maximize those investment funds to set you up to be secure and to have financial security.