What do I mean by this title? What I mean is this:
Build a nest egg:
Most people think they need a stable job so that they will receive a paycheck on a consistent basis. Why do people want a consistent paycheck? So that they can pay their bills comfortably and have some disposable income left over. But do you really need a consistent paycheck to pay your bills, or could you have a nest egg in the bank that will cover six months to one year of personal expenses should you need it and a consistent yearly income. In other words, what provides more security: a consistent paycheck or one year of expenses in the bank? If you lose your job, you no longer have your security, but the money in the bank is not going to disappear if you know how to manage it.
As a contractor, because of your extra income potential, you have the ability to build up a reserve next egg if you are able to keep your personal expenses the same while raising your income for the first year or two. Many contractors understand this concept, but many more still find a way to spend all that they make.
So, the first key to security is to make adjustments in order to have a nest egg in place. I know that this is not possible for many people, but there are those who could do it but don’t.
Clients who will call you:
The second form of security is to have a number of people who want to hire you. If you’re a full-time employee and lose your job, who do you know who will want to hire you tomorrow? If you’re like most full-time employees, the answer is either “nobody” or “maybe one company.” This would probably be someone for whom you’ve worked in the past.
But as a contractor, once you’ve been consulting for a couple of years and have done a good job for six to eight companies, you will have a group of organizations to which you can reach out in order to see if there’s work for you. These companies compose your client base. They have paid you in the past, and if you’ve done a good job, they’re waiting to pay you again as soon as they have a need for your expertise.
If you develop enough of a client base, then you’ll eventually have enough clients asking for your time. Not only will you have enough work, but you’ll be able to set terms that accommodate your lifestyle as well. However, you’ll not have a client base if you keep accepting extensions with the same client. By doing so, even though you’re a contractor earning a higher rate of income, you’re falling into the category of accepting the consistency of what you know in exchange for building a client base. Although this is easier in the short term, you’re giving up some of the long-term security that comes from building a client base.
Consulting/contracting firms that will call you:
The third area in which to build security is with the people who can get you the work. You have relationships with consulting or contracting firms that can consistently provide you with work for which you’re looking. Contracting firms have favorites based upon the quality of their work and the personal relationships they’ve developed with them. Do you have a process for identifying which firms have the greatest ability to help keep you working? Do you have a shortlist of firms and regularly keep in touch with them? I know many contractors who choose not to make time for casual conversation with a firm until they’re 30 days away from needing a new contract.
Or is your strategy to keep a list of everyone who calls you, and then send a mass email when you need a contract, hoping that one of them has a good contract for you? This approach will not make firms feel inclined to do you any favors. Perhaps a better strategy would be to develop a win-win relationship with a firm, so that when you need a contract, they have one waiting for you.
As you can see, having a job with a consistent paycheck provides security — until the job goes away unexpectedly. Then you might not have anything on which to fall back.
I understand that consulting and contracting is not for everyone, due to the amount of travel that can be required. But if you have the ability to be a contractor, this three-layer approach to building security can provide much more long-term stability than could any single job.
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