My Financial Implosion: Diversifying to Avoid Disaster
‘œConcentrate your energies, your thoughts and your capital. The wise man puts all his eggs in one basket and watches the basket.’ ‘“ Andrew Carnegie
It’s been almost two months since my wife’s contract suddenly ended, and we made dramatic cuts to our budget. We’ve found that the slow economy is making it harder to find larger, long-term contracts, so we’ve compensated by taking on smaller, lower-paying projects that we would have normally turned down. I’ve been working a lot of overtime, trying to turn these small jobs around quickly to generate more income.
Last week, I worked 65 client-billable hours. The week before, I worked 60. Even though I’ve been putting in extra time and we’ve made every effort to shave our expenses, our business’ second quarter net income is down 30% from the same period last year. Ouch.
My wife and I have spent quite a bit of time discussing our situation, and we’ve realized that we’ve made yet another mistake with our financial lives. For the past ten years we’ve both worked in the same industry, for the past eight, we’ve both worked for the same business, and for the past three, we’ve both worked for the same client. Although this situation has worked extremely well when times were good, it’s been a real detriment as times have gotten harder.
Although working together has meant that we can play off each other’s skills and talents, making a whole that’s much greater than its individual parts, it’s also meant that during the lean times there’s not as much to fall back on. When our client hurts, the pain is passed on to us. We’ve come to the realization that having all of our income eggs in one basket isn’t such a good plan.
The solution, we’ve realized, is that we need to diversify our sources of income. Rather than relying on one client, one business and one industry, we are looking at other ways to generate income. We’ve knocked around a lot of different ideas for other small businesses, and my wife recently decided to go back to school to become a paralegal. She recently enrolled in an eight-month online course through an accredited university, and by the end of the year she’ll have the credentials to start working. She’s already received several nibbles from local attorneys interested in contracting with her after she finishes, so the future is looking brighter.
While my wife works on her paralegal certificate, we’ve been trying to add other sources of revenue to our income stream as well. We’ve worked on smaller projects that have involved writing and photography, and we hope we’ll be able to bring in more of those kinds of jobs.
Although it appears my job is relatively secure since my client has told me that he’ll likely need my services for at least another two years, I’m also looking at ways to create other sources of income in my spare time. Although it certainly means I’ll be working longer hours, knowing that we’ll have money coming in from different sources will help me sleep better at night.
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I applaud your wife going back to school and changing careers but I do believe she may have some difficulty in getting “contract” work as paralegal once she finishes up school. I myself am a paralegal, I work in government and it took me quite some time to get steady work in the field. Its the “experience” thing and in the legal arena that is what counts. May not be fair but “it is what it is” I have found that the legal field is like one big club. Its very hard to break into it but once you do you are in. The wife may want to get into a law firm, etc to get some experience for a while and then break out on her own. I myself am leaning towards working on my own but I have played the game for awhile and gotten my feet wet. Not trying to dampen her dreams but offer some advice. Best wishes to her!
Good advice, Alex. Diversity is the spice of life. Good luck to your wife as she goes back to school. That’s never easy!
Education is really important even for adults who need to make a career change.