For as long as I can remember, I recall hearing the notorious “work from home” scams. They seem more popular today, but maybe it is just because I am spending more time on the internet. I figured this would be a great time to explore the topic of self-employment for all of my readers who are curious if it is a viable career. While I will try to remain neutral, exploring the pros and cons of self-employment, I would place bets on my siding with one position over no opinion at all.
Pros of Self-Employment
Self-employment seems to be everyone’s dream at some point. Not only do you get to be your own boss, but depending on the type of work you do, you get to choose your work location. Let’s get into the details…
- Location Independence – There is nothing holding you down. If your work is online, you can work and live from anywhere. This means you can live in a less-expensive region and spend less money on expenses.
- Be Your Own Boss – Do you hate having to do the menial tasks or being the low person on the totem pole at work? You don’t have these issues with self-employment. You can choose what you want to do and what you want to resource. Either way, you are the one that makes the decisions.
- Lifestyle Flexibility – Do you have a child that you want to take care of while also working? Do you have a yoga class to go to in the middle of the day? With working for your self, you have the flexibility that traditional employment would exclude.
Cons of Self-Employment
While it may sound like the dream job, it’s not always the best option. Here’s why:
- Takes a Lot of Work – While you may be able to slack off at your current job, working for yourself means that when you are on the clock, you have to be active to earn the money.
- Taxes, Taxes, Taxes – When you are working for yourself, you have to pay taxes and a lot of them. The 15.3% self-employment tax really hurts. People who are self-employed often have to pay approximately 1/3 of the net income. This means for every $3,000, you are earning $2,000 after taxes. That’s a big chunk of change.
- Uncertain Income – Unlike a traditional job, working does not always equate to income. Sometimes you have to face the fact that your income could fluctuate, so it’s best to have a little cushion or even an emergency fund.
Working for yourself is never easy. It takes a lot of work and time to build up your income and it could disappear the next month. While the location independence and freedom may be worth the risk, you need to be certain that your household budget won’t suffer because of this risk.