A different way of looking at income

How much do I get paid per month?  This is the common question we ask ourselves when looking for new jobs or business ventures.  The “per month” way of measuring income has always been the default approach.  But is it the best one?

When I was listening to “The 4-Hour Workweek” audio book for the first time, the writer, Tim Ferriss, proposes a better question which changed the way I perceived income:

How much do I get paid per hour of work?

Why is this a better question? Let me answer that with an example:

Jose earns P100,000 per month, working at a high profile job for 10 hours a day, 5 days a week.  He works 10 hours a day because apart from the actual time in the office, he does overtime and takes some work home.

Maria, on the other hand, makes P50,000 per month, working 12-hours a week as a freelance web designer.

Based on the details above, this means that Jose makes only P500 per hour, while Maria makes P1041 per hour(*).  Apart from that, Maria has a lot of “free” time on her hands, which she can use to spend quality time with loved ones, pursue hobbies, and even look into other income streams.

“So what?” you might say.  Jose still makes more per month.

That may be true, but unless Jose is truly passionate about his job and never thinks “I’d rather be doing something else” or “I’d rather be somewhere else”, then he’s just trading his life for money. Rita Mae Brown said it best, “Don’t trade the stuff of your life, time, for nothing more than dollars. That’s a rotten bargain.”

If we look at income this way, then it seems like entrepreneurial ventures, consultancy, and freelancing sound like the best way to go.  Corporate telecommuting is also a good option, provided that your boss doesn’t require time-based logs of your work, and that you are productive enough to get the most tasks done in the least amount of time.

Try to do this exercise for yourself and see how much you get paid per hour.  What are your results like?  Was it less or greater than what you expected?

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(*) Of course, if you’re a service provider like Maria, this doesn’t actually mean that you should charge clients by the hour.  In creative fields, that’s never a good idea because you can easily be exploited.  Charging by project milestones is the best way to go.  To know your hourly rate for yourself, note the overall fee you received and divide it by the number of hours you worked.

Image by Steve Woods

Protecting Yourself Against Layoffs

Recent items in the news must sound depressing for Filipino employees.  An outsourcing firm laid off 500 workers, many OFWs lost their jobs, and even the Intramuros Administration laid off some of its workers.

Since I work as a freelancer, there’s no danger of layoffs in the strictest sense.  But I need to prepare myself in case my biggest clients close up shop or decide to cut off my services from their annual budget. In times like these, we all need to protect ourselves from sudden unemployment.  Here are some ways we can do this:

Build up your emergency fund.  I’ve written about emergency funds so many times, which just goes to show how important they are – especially in times of financial crisis.  For the uninitiated, here’s a definition of an emergency fund:

“It’s basically a collection of money that you can access whenever there’s an emergency. And only an emergency. Emergencies may include the following: the sudden loss of a job, unforseen medical bills, a natural calamity, sudden home or vehicle repairs, etc.”

Right now, I have 6 months worth of living expenses tucked away in my emergency fund.  If I lose a big client or all my clients, I can go by without work for 6 months.  Of course, I won’t wait until my emergency fund runs out before I look for new jobs, but it gives me a sense of security knowing that if I have no income, I can still support myself and my family.

Have multiple streams of income.  Whether you’re a freelancer or a corporate employee, it helps to have multiple ways to earn money.  Freelancers should have more than one client at a time.  Corporate workers should have businesses, investments, or part-time gigs that will be able to support them in some way when they get laid off.

For me, I have more than one client, but I also have other streams of income such as ad and affiliate revenue from my other blogs.

Why not hit two birds with one stone by having streams of income that you can add to your resume? Apart from getting extra income for yourself, you’ll also increase your worth as an employee or freelancer by having income streams that will reflect well in your resume.  Did you write and sell an ebook about your industry?  Did you work as a virtual assistant for an internet mogul?  Did you start your own business?  Having these experiences usually gives you the right to charge a bit more than others who only depended on their corporate jobs to learn new skills.

Cut down expenses.  This is always a must, even if there’s no financial crisis.  Be aware of how much you spend each day and see if there are areas you can cut back on.

Have a plan.  If you do get laid off, what are you planning to do with your time? Sure, you can take a couple of days to rest, but after that, you need to take some action even if you have an emergency fund that covers your expenses.  Why?  Because it’s never a good thing for the mind to be idle.

This would be the perfect time for you to polish your resume, get an online presence (such as your own professional website or blog, or even just a LinkedIn account), and find other ways to make money.

Use your brain, not your heart.  Most money decisions are emotional decisions. This is why many people fall prey to scams, get-rick-quick schemes that don’t work, and failed investments.  Don’t just jump at every possible income source you can think of without being informed first.  If you just join every PTC (paid-to-click) site, invest in stocks you know nothing about, and participate in multi-level marketing schemes, you’ll just be wasting both your time and your money.  Making logical, informed decisions is the only way for anyone to survive job loss.

Usually, layoffs are sudden and outside your control.  But this doesn’t mean that you should be financially powerless if you lose your job.  By doing the 5 things listed above, you’ll be able to cushion yourself from some of the financial effects of being laid-off.

How secure do you feel with your job?  Are you doing anything to protect yourself from job loss?