Does job stability accelerate wealth creation?

One of the motivations for having a passive income nest egg for many people is to diversify away the risk associated with your own employment situation. However what if you had a more “stable” employment? Should you use that to take on more risk?


The role that an investing strategy fills is a very personal one, which depends on your own circumstances. For many people it’s to fill a void post retirement. For others it’s too have a back up plan for a rainy day. For much of the early FI crowd it’s to provide a way out to escape the rat race early.

Now exactly how you construct that plan is going to be a function of individual risk appetite, ability to handle volatility and whether you want to rely on income and growth, Significantly, age is also mentioned as a factor which should be taken into account as well. Why?

The theory goes that younger folks have more time to ride out volatility in the market and would be well served with more aggressive growth stocks that may have the tendency to move all over the place in the short term, but which can generate sustainable wealth in the long term.

For someone that’s a little older, you may run into a spot of bother if the time when you want to cash in those growth stocks is the exact time you want to retire. In a down market that volatility could cripple your nest egg.

So having a fairly safe portfolio which trends up in a stable way, year in year out is a good way to mitigate against significant market fluctuations. The trade off is that you may not get the growth, because you have to be a little more conservative given the situation.

While this principle is pretty well accepted in the case of age, could this be something that could apply in the case of your core job and income as well?. Here’s my thinking.

Let’s say I was in a high risk profession in terms of job security, say auto manufacturing for instance, where jobs have been slashed left and right . I’d likely be very nervous to build up assets that have long term debt commitments attached to them for fear that a new round of layoffs may be just around the corner.

It would probably also make me fairly nervous to hold any kind of equities because I may have to draw down on my nest egg at a moments notice and get into cash pretty quickly. In this situation, I’m probably going to want to have cash or cash like holdings like bonds rather than equities given how risky my core underlying income is.

My core job and industry serves as a bit of an inhibitor for taking more risk. Unfortunately, actually taking that risk may also ultimately pay off significantly down the line.

Let’s say you’re on the reverse end of the spectrum. In a government job, or working for an energy company with a history of stability and security. While no job is ever truly secure these days, being a government worker or someone in a major utility with regulated pricing increases at least holds some measure of safety. There’s pretty good dependability as far as the safety of your pay check is concerned.

I’d argue here that because your day job and your core pay is pretty secure you’re in a much better position as far as generating long term wealth. You can make use of significant “good debt” to build up asset balances, without being in fear of your core income source being cut at the knees. You can build up positions in growth stocks because it’s less likely that you’ll need to quickly convert to cash in the event of a layoff, given your probability of a layoff is that much less likely.

In my view, our investment habits are very much influenced by our psychological perceptions of risk that we face in our lives. Whether it’s health related, employment related or otherwise. If I’m in poor health or in a risky job, I’m just not going to want to take on the risks that go along with building up growth assets, because my situation is uncertain.

Conversely, if I’m in good health, with a long term outlook, and a stable job, I probably could, and likely should feel a measure of confidence to pursue assets that could move around a lot in the near term but generate strong wealth long term.

So next time that flashy new job comes around that offers considerably more pay or a compelling exit at the end of the tunnel, but with considerably more risk,  take the time to work out whether you’ll actually be doing your long term wealth creation more damage. Not to mention the possible impacts on your mental and physical well being

Even moving from a more boring, yet stable job to one that offers comparable pay but with more excitement in a more volatile industry should make you think twice.

That sexy start up role with mega options could actually be harming your ability to create meaningful wealth by making your more risk averse about your core investments. Not only may it not have the generous 401k matching elements that you see in more established, well funded company’s, but if there’s a risk that your company’s may fold tomorrow, you’re less likely to take actions that could greatly help with wealth building, such as taking on some modest level of debt or chasing more aggressive growth assets.

My takeaways

While it’s not always possible or easy to control the job or industry that we find ourselves in, sometimes it’s easy to take things for granted. Boring but stable in your work life, as much as in your investing, can lead to significant wealth creation by not making you think twice about taking on debt or investing in growth assets. If you are content and happy in a stable but unglamorous job, you may be doing your investing a world of good, more than you even realize.



  1. Thanks for your post Integrator. I know one thing for sure. Our passive income and low debt level have made my past layoffs tolerable…..even enjoyable because of the free time. Had we been living “high on the hog” or lacking our passive income, we could have been caught in a liquidity crunch and needed to sell investments or our house/cars. Grateful for our blessings as we didn’t even need to take money out of savings. Financial planning and opportunity really pays off. We are very blessed.

    • Integrator says:

      Hi Bryan,
      I also think it’s critical to have a safety net in place to help ease the transition if you meet with some unexpected event. I wonder if you always had the threat of layoff over your head, would you even have the courage to invest to build up an investment base to generate that passive income? I think if it was me, I’d likely just want to be in cash all the time if i knew my time at the company could be up any time. It’s a real catch 22!.

  2. MMD says:

    You might be on to something with this. Though its hard to predict when someone may or may not lose their job, I do think you could reasonably approximate the relative probability that someone could be let go as you did in your two examples. And with that, I think that employment income is a huge under-estimated asset that most people overlook. At this stage in my savings, my job generates far more income than I could ever hope to achieve on my own. Even though my goal is to one day retire early, I still optimize and appreciate how much income I earn because I can respect how critical it will be in achieving my goals.

    • Integrator says:

      Hi MMD, I agree with you. I think i’m relatively risk averse in that sense of not wanting to do anything to jeopardize my core income. But its the perceived stability of that core income that allows me the freedom and flexibility to take more risk in my investing because those bets are pretty small and calculated. I’d be too scared to do that with my core income. I know some folks have quit their core jobs to focus on online and other incomes full time. I just couldn’t do that till i had full expense replacement + buffer. A reasonably stable core income gives me scope to aggressively invest, not vice versa.

  3. Jon says:

    There are so many curve-balls life can throw at you, you may get ill, have too look after an elderly loved one, your new boss could be intolerable even if you think you have a secure job. My solution is pretty simple, get to that passive £1500 – £2000 per month asap and I’ve made it. Whatever happens I will be able to put food on the table and pay the bills. Guess real utopia is if you love your job and are also FI. Reg, Jon.

    • Integrator says:

      Jon, I hear you. Until you have complete expense replacement somewhere else, you’re always at the mercy of what life can throw at you. I think health is really the scary one. You can always get another job elsewhere, even if it takes a little bit of time., but if your health is affected, all bets are off. I think we’ll hit the level of fi income that I want later this year, but we’ve now got mortgage debt we’ll need to aggressively pay down. More on that later.

  4. moneycone says:

    Having a stable job means one less thing to worry about! Definitely plays a role in wealth creation.

  5. Very good points. Stability of the company/industry is something I’ve tried to weigh with each job offer, but often times there’s just no way to tell for sure. That’s why I try to have an investing plan that will hold up in any scenario.

    • Integrator says:

      It’s hard to pick what may be stable long term, given the nature of change today, but starting with something that isn’t too cyclical in nature can help avoid the peaks and troughs.

  6. […] finally the always interesting Financially Integrated asks an important question about job stability and wealth creation. I have recently come to value my steady well paying day job much more than I used to for many of […]

  7. I’ve been at my company for 15 years and have a pension. My wife has a pension and her job is very stable, that has allowed me to be aggressive on investments. I look at the pension as a bond, thus I’m 99.8% in stocks which has helped build an aggressive net worth

    • Integrator says:

      Ah, the pension! Would love to have one of those, unfortunately my company doesn’t provide one. My wife has one though. Exactly right, a pension is just like a bond in my books in which case it makes total sense to go all in stocks.

Speak Your Mind