I saw the movie “Up in the Air” starring George Clooney the other day. It’s one of the most acclaimed movies of the year, despite being a rather simple film.
I’m not going to give anything away, and this certainly is not a movie review. What I want to discuss is Clooney’s character’s profession in the movie.
In the movie, Clooney flies around from city to city firing people. Companies have to lay employees off, and they don’t have the courage to do it themselves, so they contract that work out to Clooney and his co-workers who fly in and sit down with a bunch of employees, one at a time, and explain that they will no longer be working at this company. They’re skilled at calming people down, encouraging them to explore new life options, and are in general knowledgeable about the psychology behind being fired and how to deal with those people since they do it on a daily basis.
In the movie, they show dozens of such firings. (Of course they never call it “being fired”. Euphemisms, always.) Just about every time, the ex-employee is shocked, betrayed, and then asks how they are going to tell their spouse and children, how they are going to keep their house, how they are going to maintain all that they have.
The point is, they were living paycheck to paycheck. And while this is fiction, it’s exactly how most people live. People buy a car, buy a house, buy a bunch of stuff to fill that house, start a family, buy entertainment, but they do it all on the assumption that their regular paycheck will continue to come in. The second that assumption fails, everything falls apart. This is often shown to be the difference between the middle class and the upper class. The middle class focus on how much income they have, since their finances are so utterly dependent on their income. Their wealth is defined by their income, not their assets. They spend most of it, perhaps save a little, but the foundation of their lifestyle is totally dependent on that income which can sometimes be out of their control. The upper class, however, focus on building wealth. They focus on the assets they have and how they can grow them. They build passive income instead of working for a paycheck.
The middle class don’t have to live like this. Sure, early on in your life before you’ve had time to build wealth, you’ll probably be bound to your paycheck. If you start early, cut spending by refusing to play the consumerism game, and learn how to invest, you can set yourself up so that losing your primary source of income will only be a road bump, not a catastrophe. By building up a collection of assets that continually pay you back with passive income, you’ll be buffered from uncertainty that can and will enter your life at some point.