The world is changing… fast. The old rules don’t work. Whatever it is, you need a Plan B.
It’s not a secret that I love property. I didn’t name my website iloverealestate.tv for nothing.
But I also get that it’s not for everybody. I totally get that some people will be drawn to other things. Some people like shares. Some people like commodities. Some people like emu farming.
But what I really don’t get is people who have no Plan B.
What I mean by that is people who’s financial strategy is to coast along the well-worn ruts of life – finish school, get a job, work hard, live off your pension.
I hate to burst bubbles, but if that’s your strategy, you don’t have a strategy. The world is changing. You need a Plan B.
Take the work part of the story. Back in my parents’ day, you got a job when you were 18, and rode it out til you were 65 – if you made it that far!
But that’s not the case any more. Regular work is becoming less and less the norm. We’re seeing huge increases in casual work and contracting.
On top of that, incredible technological change is making jobs obsolete left right and centre.
I was reading a story the other day about the company that makes ‘Twinkies’ in America. I gather it’s some sort of cakey rubbish. Anyway, the company went bust and went into bankruptcy. Another company bought their assets and revived the brand.
What was the first thing they did?
They fired 80% of the workforce. 80%!! Just like that, replaced them all with machines.
It’s old news in manufacturing, but robots are also coming for white-collar jobs.
And as we enter the rocket launch phase of technological growth (we aint seen nothing yet!) we’re going to lose more and more jobs to machines and computers.
Four Corners ran an interesting article on it last week.
They interviewed Jon Williams – managing partner with consulting firm PwC. He reckons 44% of current Australian jobs are at risk over the next twenty years.
“Many of today’s jobs will disappear. So there’ll be fewer of today’s jobs, but we believe that there’ll be more of tomorrow’s jobs to replace them. Really what what’s happening is the same thing that happened to blue collar work in the Seventies and Eighties and Nineties is going to happen to white collar work in the next ten to fifteen years…
… The jobs most vulnerable to computerisation include accountants, lawyers and real estate agents.(!) Demand for beauticians, personal trainers, manicurists and intensive care nurses has been booming. The number of baristas in Australia tripled between 2006 and 2011.”
This is a bit of a sunny view. Sure, there will be jobs that no one has ever heard of. But I’m not sure that a truck driver working full time will be all that happy to learn that there’s casual work going in cafes.
Charles Brass, Chairman of the Futures Foundation, laid down some hard truths:
“I know there are people who say don’t worry about it, the jobs will come, but the debate is done. The evidence is in. What jobs are being created are part time, casual and fragile. There’s not enough money in those jobs to sustain people and there aren’t enough of those jobs for all the people that are falling out the bottom…”
So the point is, that if you’re just planning on happily working your way into retirement, you might be in for a shock. Work won’t be what it used to be. And it certainly won’t be as reliable.
To me that means we need to be actively creating other sources of income. That might be property investing, but it could be anything. Your Plan B needs to have income coming from a diversity of sources.
The other point I’d make is about the pension.
Things look ok now, but what happens when the Australian budget comes under pressure. Ratings agencies have already put us on a negative watch. If we lose our AAA rating, it becomes more expensive to borrow, and the budget blows out even further.
At some point, the government could get in to trouble. At that point it might be tempting to raid the Future Fund of cut back on pensions.
That might not happen. But for it not to happen, at some point some party has get away from the usual promises of populist tax-cuts and spending increases AND win office. Maybe you’ve got more faith in our politicians and the system than I do.
So if your strategy involves happily living off the old age pension, again, you don’t have a strategy.
The world is changing. We might not like it, but we have to take our finances into our hands. We don’t have a choice.
Now that might be property. It might not be. But whatever it is, you have to have a Plan B.
Nervous about where all this is going? What’s your Plan B?