Making Money

Financial Independence through Temp Work

Financial independence through temp work – a statement that makes people question your sanity! How in the world can taking a short-term job with low pay and crappy healthcare help you get ahead? No matter what the wage is, it’s only half of what the temp agency makes. You never get what you’re truly worth and after a while you can even lose confidence that you actually deserve to get paid a decent salary.

Despite those negatives, temp contracts can help people in four different ways: (1) to help you climb the ladder of skills and responsibilities needed for that high-paying corporate gig; (2) to give you the skills needed to start your own business; (3) to give you an off ramp for when you’re ready to start moving into retirement; and (4) a way to keep health insurance with minimal obligations.

Using Temp Work to Climb the Latter

First, let’s examine temp work from the perspective of increasing your earning power. In my case, I quickly learned after finishing grad school that there were few paying jobs in the field I studied in.  International affairs is a fun thing to study, but there are only so many diplomats and intelligence analysts in the world. I thought a bit about what I wanted to do and decided that business analysis was an interesting direction to go in. Unlike the day-to-day drudgery I experienced as a minimum wage drone, a business analyst gets to use their skills to pick apart odd problems and finish interesting and unique projects. You got to go home knowing that you helped move the organization forward and that your contribution made a difference. What could be better?

Unfortunately, most companies hire business majors for that kind of work and I had zero experience! To overcome this hurdle, I took a low-level temp job in the field and after that assignment finished, took a similar position doing the same thing only with more skills and responsibilities required. I volunteered for new work, learned extra technical skills in my spare time, and made sure that my bosses liked me and were willing to give good references.  After doing this three times over two years I suddenly started finding myself overqualified for positions with major Fortune 500 companies, and soon after that one hired me.  You can imagine the look on my face when I heard that their opening offer was double my current pay!

As my experience shows, this is an easy method for breaking into an industry and working your way up the pay scale. If you don’t have all the education, skills, or experience needed for that dream job, don’t worry! You’ll get them eventually.  All the technique requires is that you move up with each job.  Take a job, survive 6 months to a year while volunteering for difficult projects, then apply for a better one and repeat. If you do it right, you’ll create a narrative of an ambitious, striving worker who takes on challenges and overcomes them time and again.  The one thing to avoid is taking a temp job simply to have a job and move sideways or down. If you’re only chasing after money and not after a career path, you’ll start falling back down that slippery slope to being one of those disposable drones that they hire in packs of 20 for a project only to lay off afterwards.

Using Temp Work to Build a Business

Second, a temp job can give you skills that you need to succeed if self-employment is your goal.  If you want to be a home remodeler for example, then sign-up with a contractor and volunteer to cut boards, build walls, install windows and lay tiles. If you want to sell a product, then work in a business related to that product, or join a (respectable) sales organization and learn how to make a pitch and close a deal. If you want to run a business and keep it running, then spend some time in another company’s back office and master spreadsheets and business processes. You can learn everything you need to succeed before you risking your first dollar.

Case in point, my roommate and I stand at opposite ends of the spectrum.  He works as a general contractor and has all the skills people want to pay money for…but he despises anything to do with office work, e.g. answering phones, writing invoices, preparing contracts, etc.  As a business analyst, I can whip through all that back office work with no trouble…but have a hard time finding anyone willing to pay for those skills. You can try going door-to-door selling your Lean Six Sigma background, but all you’ll get are blank stares. If someone though had the complete package of construction and administrative skills though, they’d make more money than 80% of people in the industry easy. The same is probably true in most sectors.

This method works because most people tend to fall into businesses haphazardly. They were always talkative and good at sales, they had a logical mind and took to coding, or they were naturally handy with power tools.  People who go into business by design will succeed where others fail.

Using Temp Work as an Off Ramp

Third, temp work can be a good way for people to start pulling back for early retirement. It doesn’t matter how much money you make if you’re working every waking second, see your health fail, or never have a chance to see your spouse or kids. One manager I know who blew me away by saying that her current directorship is actually a downgrade from her last job.  When she worked in IT, she was on conference calls almost 24 hours a day, seven days a week, and was so tied to her computer that she rarely managed to eat a hot meal and her pre-school age daughter was left to eat dinner alone at night. When her child finally became a kindergartner this manager suddenly realized that she had missed the last five years of her child’s life and changed her ways.

However, it’s one thing to know that you are in a bad position and need to get out. It’s another when you realize that your wasteful spending keeps in that hell. If you quit, you won’t get any severance pay and it could take you months to get your next job. Those few months mean the difference between prosperity and a vicious spiral of debt.  Temp work, which usually has a much quicker interviewing and onboarding period than many full time gigs, can serve as a bridge out of the pressure cooker as you restructure your life.

Temp work can serve as much more than a stress reliever, however, if it’s tied to a growing collection of assets providing passive income.  Imagine that every time you buy a rental house with, say, a cashflow of $6k a year that you could take a job paying $6,000 less.  Or that every dividend stock you buy saves you hours of overtime as you stop caring for bonuses or raises. You go from a job that demands 50+ hours a week of top-notch performance, where people eagerly await to skin you alive on every call…to an hourly gig where your skills vastly exceed what’s required and you’re the best temp worker that they’ve ever seen.  You punch out, go home…and leave the work behind. With your investments growing, you can eventually descend to minimum wage while continuing to bring in the  same income as before. You become that investor of legend – the millionaire cashier. The secretary making six-figures a year.  The person whose obituary blows people away when it reveals your net worth (Like this guy). Not too bad for a temp!

Note: This is the strategy I plan on pursing in the medium-term before retiring early.

Using Temp Work for Health Care Insurance

Finally, if there are two boogeymen in the early retirement community they would be (1) spending too much money early in your retirement, and (2) the healthcare costs.Both can kill your retirement by drawing down your assets, either through excessive spending or sudden emergencies, in such a way that can take years to make up. If going through a recession is bad, try going through a recession while spending time in the hospital due to a car crash! I know guys who’ve gone bankrupt this way.

Temp work addresses both of these challenges by giving you enough income to avoid tapping into your retirement money while it grows during those first few crucial years, and to give you a safety net in case of catastrophic accidents. Sure, the insurance may stink and you could be stuck spending $5k worth of deductible before it covers anything, but $5,000 out-of-pocket is better than paying for a prolonged $100,000 hospital stay yourself. A small, periodic expense like that is something that the average FIRE devotee can cover with little trouble.

In closing, temp work is an interesting tool in the arsenal of anyone striving for financial independence and early retirement. When used wisely, it can serve as steps on the ladder when you’re working your way up to to a well-paying career, and provides some footing on the way down when you’ve finally had enough. It helps you obtain the skills needed to work for yourself, and provides a layer of protection from the major threats to your  hard-won, financially free future. If anyone has any interesting temp work experiences on these points, please feel free to comment below.

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