I was lucky enough to know of a friend who was financially free before he reached 40.
He is a very humble person who has a very decent passive income coming from the business he has helped built when he was in his 20s. He has since left the business but is still a shareholder of the company.
Despite being so successful and being part of the FIRE movement, he casually chatted with me over Whatsapp that his credit score may be affected come May.
His business was hit badly and with the circuit breaker.
There were two things that surprised me.
1. He seemed pretty chilled with it despite being the sole breadwinner for his family.
(If you are jumping to conclusion that he's not responsible, I think he's quite the opposite.)
2. His business was his only source of income.
It reminded me of an article that I came across recently.
Mr. Long said he feels for the FIRE folks who retired in 2019 and had less of a cushion. “I probably wouldn’t have been able to sleep if I had been in that situation,” he said.
You can read the full article here.
He also mentioned that he may be taking up a part-time job in the meantime to tide over this period.
Mr. Richard said, “I wouldn’t be opposed to picking up part-time or freelance work. Financial independence, to me, gave me the freedom to leave my corporate job to pursue things I’m passionate about. It’s not about never doing anything to earn money again.”
Through this CB period, he realised he needed to diversify his source of income.
TL;DR
So if you are wondering that only employees need to diversify their income because their mains source of revenue is salary, you can be certain that business people also need to do it too.
Because when sh*t hits the fan or if any of the income streams dries up, then it's wouldn't bode well with you or the family.
That is why I'm a big believer of diversification across different asset classes now, including vehicles that can provide guarantees. They serve as a base and investments will come as the toppings.
Depending on the risk profile and time horizon, the asset allocation will differ from person to person.
Still, there is one lesson that can be learnt from this friend...
Never put all your eggs in one basket.
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