There is a temptation at times to lionize the self-employed for taking control of their occupational future.
The self-employed make their own hours and have the freedom to work hard or hardly work.
However, while the idea of being your own boss is nice, the uncertainty and financial constraints of being self-employed can be a harsh reality.
In fact, it might even suck.
This is especially true when it comes to finances, as many of the benefits that we take for granted were collectively bargained for through years of protest and negotiation.
Becoming self-employed often times turns into an education of the dual responsibilities required for those who choose to be both an employer and an employee.
In addition, the stress associated with growing and expanding a business can be overwhelming with so much on the line. Not only do a majority of new businesses fail, even sustained success over a few years comes with the added fear of long term viability.
The following are 5 reasons why being self-employed may be something a baby does with its thumb:
1. More Taxes
Depending on the tax rules of your country, being self-employed can significantly increase your obligation to the government.
In the United States, for example, Medicare and Social Security taxes are split between the employer and the employee.
However, the self-employed individual is responsible for paying both.
2. Inconsistent Business
When you are self-employed, it means having to bear the market through its ups and downs.
There will be periods when there is more work than you can handle and periods when it feels like you will never work again.
The most difficult part of dealing with an unsteady income is learning how to manage your money.
Being self-employed means accounting for the lean times by resisting the temptation to spend when your wallet is full.
3. Retirement Benefits
Working for an established employer typically comes with a variety of financial benefits.
Contributions to a retirement plan are usually matched by an employer, and many businesses offer pensions and other benefits to ease the transition into old age.
In the United States, medical, dental, and vision insurance is usually covered by an employer sponsored plan.
While the self-employed can invest in a tax-sheltered, individual retirement account, there are no matching contributions made from an outside benefactor.
4. No Paid Vacation
A typical employee is granted two weeks paid vacation each year from his employer.
This is in addition to paid sick time, maternity or paternity leave, national holidays or other exclusions.
In other words, full-time employees are granted about a month of salary for doing absolutely nothing.
A self-employed individual, on the other hand, must take time off at the risk and expense of their business.
While modern technology attenuates some of these concerns, a protracted vacation is still fairly difficult due to the expenditures alone.
5. Long Term Sustainability
The scariest part about being self-employed is the propensity for this type of business to fail.
With any job, it is likely that an average worker will be retained due to turnover and hiring costs, allowing them to ride a gradient of mediocrity until retirement.
The same is not true for the self-employed. Even those who manage to earn a steady income for years may abruptly find themselves without a job, and too old to start over in an office job.
Moreover, the fear and uncertainty can lead to higher stress and anxiety, elevating health risks.jeremyclarke
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