How had we become economically dependent in the first place, I wondered? Like many people, early on I had let life happen to me, sufficiently content with what came along. The message while I was growing up was that you went to school, got a college education, looked for a secure job with benefits, and lived a traditional lifestyle that included marriage, kids, house, two cars and retirement at age 65. This was the very definition of security and stability, and there was little reason to question it.

But Pete and I had traveled virtually parallel paths: divorce and decimation of retirement accounts, career changes that veered into self-employment and business ownership. The previous ideal began to seem more like a bum deal.

It all circles back to stuff: beginning with acquisition when we start spending more than we have, and then servicing the debt we inevitably incur to get more stuff. One of the first things I sought was to be approved for a credit card, and then, a car loan. In the industries I chose and the communities within which I lived, status was conferred in conjunction with material milestones: what you drove, what you wore, where your home was located, and how much money you made. Pretty soon, you’re sharecropping the middle to upper class lifestyle!

Big influences and admonitions when we were starting out are still present today: needing to have it all, requiring more than one income, the only job we should take is the one that comes with full benefits, and that we ought to seriously consider graduate or doctoral degrees in order to get further up the endless ladders we all were climbing. And yet, we still felt poor by comparison. We compete with our peers: “he who dies with the most toys wins.” We emulate others who run the rat race faster, and feel the stinging shame when we don’t keep pace.

In exchanging control for the illusion of stability that came with a paycheck, we enslaved ourselves to a system that would ultimately fail us in a series of spectacular economic implosions. The major reason we are economically dependent is because we believe we have no alternatives. As such, our enslavement tends more toward self-inflicted.

How do we declare our independence from this kind of slavery? Economic independence has its roots in self-reliance, but it’s not as simple as heading west and living off the land. Instead, you must assess your talents and evaluate how they can be utilized. Spread the risk of loss to more acceptable levels by becoming less dependent upon a single income source, like your job. Developing new skills and investigating outlets for those skills is part of the new picture, too.

Prior to the discussion with our niece, we’d visited with other family members.  In that medium-sized group, one had been involuntarily downsized from a lifelong position with an auto manufacturer, another was continuing stressful work because her retirement income depended upon an extra few years, more than one was looking ahead to extreme physical labor or emotionally demanding work, one was a new mother who did not want to return after maternity leave, and one eked out a modest living at a level that qualified her for government assistance.  So much woe!

Each of these individuals could radically change their current circumstances just as we have. Some of them may very well do so, yet others will not. It’s hard to watch this happening to people you care about. It’s even harder to see some of them let it happen.  We know all too well that a prolonged feeling of helplessness or lack of control will lead to inertia and even depression.

If you find yourself on a similar path, what can you do to reverse course? First, simply refuse to be defeated by external circumstances. Take action. Instead of letting what you can’t do define your existence, figure out what you can.

1.     Take personal responsibility and assume control by identifying ways to earn. This doesn’t necessarily mean taking on a second job, although many people do moonlight. Investigate how to sell your knowledge, market your existing skills and abilities, convert unused possessions into cash, acquire items for quick sale at a profit, downsize your footprint and reduce the costs of maintaining your lifestyle, learn a new trade, access knowledge that you can convert into revenue.

2.     Perform due diligence on traditional education. There’s no guarantee these days that a master’s or law degree will bring you an automatic job offer. Is the price for education too great in terms of your return on investment? If you can’t pay for or work your way through school, how long is it going to take you to pay off your student loans?

3.     Brush up on your Internet skills to take advantage of a more global marketplace. Trade the time you spend on Facebook or online games to learn how to sell on eBay or etsy, put together a website, study affiliate marketing, bid on a freelance contract, write and publish an e-book, create a Squidoo lens. Even if the economy sucks where you live, it may not where your Internet buyers come from.

4.     Figure out your end game. Where do you want to be? Some 30-somethings have planned for and executed early retirement by stashing 75% of their income for the first ten or twelve of their earning years. Could you? Others have a side hustle going – they work their day jobs and work additional business ventures during off hours.

5.     Make smarter acquisitions by limiting your choices. This means you don’t have to look at 20 shirts before you buy one. Choose one out of two or three and keep moving. Shopping and comparing takes time. Trust yourself to make appropriate decisions within a more limited scope. The time you spend is just as much of a cost. Do you really need to look at 100 houses before you find the perfect one? Buy used, in good condition, whenever you can.

6.     Rig up a safety net. Get together an emergency fund for the unexpected and budget your expenses. Buy adequate insurance. Reduce debt by paying off the highest interest first. The combination of lower expense and protection against loss that frugality, savings and insurance provide is a far better form of security than any one paycheck.

There’s nothing new in any of this advice.  Yet time and time again, we see people who feel trapped and constrained primarily by their own perception. Even though economic challenges may persist, those who back themselves up using a variety of methods will fare better than those who accept the status quo.

What do you think?

Related articles

• What Our Move to Location Independence is Not (passingthru.com)
• The Consequences of Perpetual Indecision and Uncertainty (passingthru.com)
• Extreme Early Retirement in Practice: How Two People Did It (getrichslowly.org)
• Don McNay: Are You Ready to Jump Into the World of Self-Employment? (huffingtonpost.com)

Declaring Economic Independence is a post from: Passing Thru

For this post, I was seeking a synonym for “income.”  Pete and I wanted to tell the story of how we are playing offense with economic conditions.  “Proceeds” was on the list the thesaurus spit out.  I realized that “proceeds,” while a noun, looks like the plural of “proceed.”  So, the not so subtle inference is we accumulate revenue by doing, right?  How cool – a pun-like tie-in!

Here and here, in what turned out to be somewhat of a series on the economy, I mentioned that those who have been hurt the most in this crisis are those who aren’t self-reliant, as well as those whose income sources aren’t diversified.  Pensioners, employees, single income households, all take serious hits with declining markets, lay-offs, and adjustments.  While Pete and I are fortunate in that we don’t have a lot to lose, we empathize with those who are still in shock from the combination of precipitous drops in the investments and housing sectors.  We all want to feel less at the mercy of conditions we cannot control.

When we got married two years ago, we knew we would have to work long after the traditional age of retirement.  We didn’t think Social Security estimates were reliable, and we knew the benefit amounts would be insufficient to support us.  It seems like no one is able to tell whether the program is going to be solvent, or whether the age when benefits can be drawn is going to be modified.  There are any number of additional reductive modifications that might be made at any time.  It made sense to look around and see what options are out there to supplement our income.  Then, we thought, it might be possible to turn one or more of those into a vehicle that would support our dreams of travel and freedom.  We also wanted to see whether there was anything that we enjoyed doing that would allow us to work together.

Divorce wreaks havoc on most financial situations, and our experiences had been no exception.  Self-employed and single, I had refinanced my house on a no-doc loan, unwittingly putting myself in the running for poster child of predatory lending.  Just before our wedding, we put my house up for sale at the moment the real estate market died, and it languished.  Right after we listed, my mortgage rate re-set and the payments escalated to double, and then triple, what they had been.  The monthly mortgage obligation on our two homes vastly exceeded our gross income for a year, depleting our savings and any hope of traditional retirement.  We wound up selling the house for less than what was owed in a “short sale.”  Since then, we’ve been playing catch-up with our finances, attempting to move on from these serious hits.  It’s not an understatement to characterize things as pretty tough.

During that time, I took a second temporary job grading elementary school examinations at night.  The work paid fairly well, but 18 hour workdays away from home aren’t fun in your 50′s.  Pete moonlighted from his day job, too, picking up a series of free-lance photography gigs after work and on weekends.  One of those jobs found him within blocks of the famous bridge collapse in Minneapolis, and he took some dramatic photos of first responders and the devastation from inside the yellow tape.  He also set up his photography websites, (Nature and Travel Photography and Wild Places), resurrecting and updating decades of images in order to build a portfolio.

Still, we knew all this wasn’t enough.  We wanted to eventually be free to travel and work at our own ventures.  We didn’t want to be dependent upon single-source income, especially in recessionary times.  We decided to begin this blog to document our journeys – posting about ourselves, our travels, our plans and experiences.  And we looked around to see what else there might be.  We knew we’d be embarking together, but what we didn’t know was how frequently we’d encounter others who had reached similar conclusions and had begun working on like-minded goals.

Fortunately, I have a communications gig with a monthly retainer.  I am able to work from anywhere that has phone line and an internet connection.  I am still tethered to our franchise’s physical operation, but the business is cyclical.  Pete has been with the same company for over ten years, and his vacation schedule is generous.  We are both lucky to have flexibility.

Looking around, we spotted more opportunities.  Pete had a trunk full of comic books from the 70′s that I dismissed as clutter.  I was shocked when, after he put them on E-bay, they brought in the equivalent of two mortgage payments.  They are selling like hotcakes!  So, he has decided to seek out additional inventory and re-sell it.  With my blessing!

Pete also has started two online stores – one at Zazzle and one at CafePress.  At first they were just tongue-in-cheek to poke political fun.  They’ve been so successful that we have decided to continue with them after the election to showcase his photography and other ideas.  He is adding more stores with specific merchandise, and is driving traffic with ad words placements, learning as he goes.

We have been evaluating ways to coordinate our goals with this blog, but we don’t want to demean it with irrelevant advertising.  So, we are researching and treading very carefully.  Cheapening our voice is the last thing we want to do.  We decided to affiliate with Chris Guillebeaus’s Unconventional Guide to Discount Airfare. The Guide fits in with our travel ideals and we knew the information had great value.

So, while we are happy with the progress we’ve made in the few short months we’ve been at these projects, we’ve realized there is a lot farther to go.  Some of the things we are looking at are

• setting up additional websites on a formulaic basis for optimization,
• writing e-books that would share Pete’s expertise in direct mail and agency marketing and mine in small business, b2b sales and marketing,
• establishing more consulting services via referrals,

and others.  The good part about being older is you have “vast” resources of experience from which to draw!

We totally get that we are entering this landscape with a lot to learn.  We’ll plan on sharing what we’ve discovered here in these pages from time to time.  We believe that our vision of the future is quite similar to that of others.  Lots of boomers are getting close to retirement age, and younger people want to control their own destiny.

Re-thinking what work/life integration entails and how to finance their plans are subjects in which almost everyone is interested. For those of you who are exploring in a similar way, you’re not alone!  There are literally thousands of good resources available online.  Unfortunately, there appear to be an equal number of scams.  Perhaps an intermittent series could unfold as we become more proficient in rooting out the promising from the truly awful, and all that in between.

Whatever happens, it is clear that the future looks unlike our parents’ retirement.  No longer will most be able to plan or continue with leisure as their primary activity.  Recent losses have caused all of us to re-think and re-adjust.  This doesn’t have to be a bad thing.  In adverse times, the silver lining has always been the sense of community and sharing of time, talents, resources and communication.  We view the so-called economic crisis as an opportunity!

Taking meaningful charge of our future will probably have more impact on our life together than any other decision. Your feedback and ideas, no matter where you are in your journey, would be valued additions to everyone’s travel along this path.  With that in mind, we enthusiastically welcome your thoughts and invite you to share your plans in the comments.

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PROCEEDS is a post from: Passing Thru