The Table Concept: Why You Need Multiple Incomes
12/19/2021
Thomas E. Kersh
The table concept is a great way of understanding your way of life and the cost of reality of said way of lifestyle. The concept works like this: Imagine a tabletop. A basic table you would get from IKEA. Then you put silverware, plates, glasses, decorations, and whatnot. This symbolizes your lifestyle and how many different costs you have. The more items on the table, the more difficult it is for the table to balance. Now every leg holding the table up represents each income you have available. You can't just have one or two legs or else you’re gonna end up with a lot of shattered glass.
There are three main groups of income available to the average American: Active Income, Passive Income, and Savings/Reserves.
Active Income is going to be the sturdiest leg you have holding your table. This is going to be your active salary, commissions, tips, hourly pay, etc., to simplify it down. It’s going to be whatever you get paid from for your day-to-day service. Hypothetically, if you lose that primary income with nothing else to support your table, then you've just earned yourself some broken fine china all over the floor, and it's going to be annoying and time-consuming to pick up the pieces.
Passive Income is income where a person is not actively involved in earning income, i.e., owning a second property and renting it out or even a limited partnership with a company. This would be your support leg(s). They’re going to be there to net you some extra cash while also covering you if you lose your Active Income. So this time if you lose your Active Income, (primary table leg), you can take a few things off your table, and your Passive Income, (support legs), should cover for you either indefinitely or until you can find another primary table leg to hold your tabletop.
Savings/Reserves: This category isn't exactly a type of income. It's more like money stashed away to cover you in the event you’ve lost most of your income. Savings is going to be money simply stashed into a type of savings account. Then you have what I call “Reserve,” like your absolute last resort to keep your lifestyle afloat. It's going to be a brokerage account, IRAs, 401K, mutual funds, etc. It's going to be any of those accounts that have money put in them that gain value long-term. However, you don't want to take out said money due to taxes, penalties, or loss in annual appreciation. Again, any of your “Reserve” accounts are absolute last resorts. Because if your primary table leg gets kicked out and your support legs fail, you can temporarily use your Reserve money to prevent your table from crashing onto the floor
A real-world example of why you would need multiple incomes was the COVID Crisis of 2020. 13.3% of Americans were unemployed, and 21 million Americans went directly to unemployment insurance. To put 13.3% into perspective, that’s the highest rate recorded post-Great Depression. In December of 2020, 21% of Americans couldn't afford rent. In December of 2020, 14% of Americans had trouble affording food and groceries. In December of 2020, over 35% of Americans couldn't afford their usual expenses.
COVID is a great example of an uninvited guest kicking some table legs, and many Americans did not know or didn't think they'd need to know about The Table Concept. So let this be somewhat of a heads up.
Since after the various peaks of COVID, there have been humongous government bailouts, the biggest bailouts we have ever seen in American history. These bailouts were worse than the ones after the 2008 housing crisis. After the crisis was dealt with, we had the worst recession we have seen post-Great Depression.
Just to give a comparison between COVID and the 2008 housing crisis, 2008 required the government to dedicate more than $16.8 trillion, which is still being paid back to this day. And the 2008 housing crisis didn't actually start in 2008. It started three (3) years earlier. The direct economic damage primarily lasted for a couple of years later, which would lead to a massive recession as a type of cause-and-affect reaction.
Covid has cost the U.S. approximately $16 trillion in just 2020 alone. And multiple economists have last recorded the debt to be approximately $24 trillion. That amount was last recorded in February of 2021, ten (10) months ago.
So with all of this evidence, we can all come to a similar conclusion: Eventually when we get out of this COVID crisis and we start to adopt the new type of normal, there is going to be a recession, the worst one the world has ever seen.
Many people don't have the capital to build a Passive Income, although they are going to need it if they want to keep even a glimpse of the lifestyle they have now. So the biggest thing to remember going into the next couple of years is simple: Anyone can build up a Reserve fund for themselves. And chances are, you are going to need it when the time comes.