Self-employment is on the rise as more and more people opt to leave the regular workforce and venture out on their own, pursuing their own business ideas or opting for independent contractor positions within existing companies. Becoming your own Boss offers freedom and flexibility that holds a strong appeal, especially to the emerging millennial generation who is quickly becoming the largest population in the workforce. But similar to Spiderman’s hard lesson learned about power, great freedom comes with great responsibility. Before deciding to quit your current, secure job and go out on your own, here are some pros and cons to consider about becoming self-employed.
Be your own Boss
Nobody enjoys being micromanaged or having your ideas shot down because they don’t mesh with the guidelines in the corporate handbook. Being your own boss gives you the freedom to implement your own values and ideas into your company guidelines. You are free to use your creativity to accomplish your tasks and solve any problem that may arise.
One of the best things about being your own boss is that you have little to no direct oversight; you are accountable only to yourself, your clients, or the company you have a contract with. You get to take all the credit for your own ideas and successes. The downside to being your own boss is that you are accountable for any mistakes or problems that arise. Any fault will land squarely on your shoulders, there is no supervisor or boss to take the heat.
Another benefit of being your own boss is that you get to choose your clients. This is something that is not often talked about but is an important part of being your own boss. Since you are in charge, you can decide the type of clientele that you work with. Choosing to work with a company or client whose business ethics or goals line up with your own is empowering. Unlike most employment situations, if a client or company becomes abusive or too unruly to be worth your time, you can decide to no longer work with them.
Create your own schedule
Have you ever wished you could spend more time with your family, doing their favorite hobby, or traveling? Becoming self-employed can offer you more flexibility with your schedule allowing you to make more time for the things that matter to you the most. Many people seek to become self-employed for this very reason alone. Though not all self-employment options allow you to work fewer hours, many do offer flexibility in what time of day you spend those hours. For example, if you need to start at 8:30 am instead of 8 am so you can drop your kids off at school, or if you need a mid-day break to hit your favorite class at the gym, working for yourself allows you more wiggle room to schedule your life.
There are also some downsides to this aspect of self-employment. For instance, freelancers only get paid when they work, so if you take a lot of time off to go traveling, there is no vacation pay to cover those days. For independent contractors, you may have certain hours you are obligated to fulfill or deadlines to meet, which can mean working longer hours every week compared to a regularly employed person with a set work schedule.
Taxes, taxes, taxes
If you have held a steady job for any length of time, you are probably accustomed to the feeling of eager anticipation at the approach of tax season, having planned how to spend your tax return check months in advance. For the self-employed, tax season can be a very different story. Most people who are self-employed pay self-employment tax. This means that at tax time, many self-employed individuals will have to pay an entire year’s worth of taxes at once rather than receiving a tax return refund.
The upside is that as a self-employed person, you are able to write-off a lot if not all of the costs of running your company. The eligible items you can claim on your tax returns vary greatly depending on your line of work. If you are thinking about becoming self-employed or starting your own business it is highly recommended that you speak with accountants, lawyers or other professionals who specialize in your type of company be it freelance, an LLC., a partnership, etc to advise you how best to set up any work or health benefits, a retirement plan, and how to properly prepare for your taxes.
Benefits and Retirement
Many employers offer their employees benefits such as healthcare, sick pay, and vacation days. As a person who is self-employed, it becomes your responsibility to acquire health benefits on your own, at your own expense. If you become ill and are unable to work, a self-employed person usually can’t just call in sick and let somebody else cover your shift. As mentioned earlier, vacation days are not paid and have to be budgeted accordingly. The positive side is that you could have the freedom to take as many sick days or vacation days as you wish without having to call HR first.
Often times having a regular job gives you the option to put money away each month into a 401k or some other type of retirement plan. Often the money comes out of each paycheck and you don’t even think about it. However, as somebody who is self-employed, it is important to look into a number of retirement options and set up your own way to save that works for you. Too often freelancers or independent contractors overlook setting up a retirement plan and find themselves nearing the end of their working years without a way to support themselves.
There is no question that being self-employed offers you the most amount of freedom to pursue your passions and create the type of lifestyle that you desire in life. As an entrepreneur who has come from a long line of entrepreneurs, I always encourage people to pursue their ambitions and be their own boss. However, being self-employed is not easy, and you will have to use your own judgment to decide if it is right for you. Just remember, with great freedom comes great responsibility.