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Self-Employment Is Not For Everyone

Over the past year I’ve realized that my readers are divided into two different factions. We have one side that routinely faces financial hardship and is typically living paycheck to paycheck, while the other side is more focused on self-employment and starting their own business. I’ve gathered this knowledge based on comments as well as personal emails sent to me. Both of these areas are actually right up my alley considering that I used to be deep in debt, and while I still hold a steady 9-5 (more like 7am – 9pm, including weekends) I also run a slightly successful small business as well. Other than the occasional post about my very adorable Morkie named Stella, I’ve focused more on the side that struggles financially rather than the one that is seeking self-employment advice. Though I’ve found that both sides tend to intertwine more than they realize. Running your own business can be both rewarding and complicated, and it comes with a crap ton of stress. I’ve recently received quite a few inquiries about how much I make blogging, how they can be successful in this business, and just in general why I haven’t made the leap to full-time self-employment. Let me give you some food for thought on why you should think twice about self-employment!

One of the biggest benefits of working for a company is that they pay you to take a vacation! It works out well for them because you relax and recharge your batteries so it keeps you mentally and emotionally healthy. While at the same time you can take some guilt-free time off work and still get a full paycheck. I watched my parents work in the restaurant industry when I was a kid. It was a shame to see that not only did they work on tips, which weren’t always so great, but they also took a financial hit anytime they took a vacation or even a single day off. I think that’s part of the reason they instilled into me so young that I needed to go to college and find a good paying job. Unfortunately I’ve landed in an area that while I receive generous paid time off, I am rarely able to actually take that time…but you get what I mean. If you venture into the self-employment world then nobody is going to pay you for your time away from work. I’ve learned this just based on putting more effort into my blogging in the rare event that I do get to use a vacation day. Never any time to rest!

Medical/health benefits are so important, and often they are not given the proper thought and consideration. This is something you should consider not only when venturing into self-employment, but also when switching jobs. Some companies are able and willing to offer better benefits than others, and salary is not the only perk you should take into consideration. I once worked for a company that paid me considerably less than I make now, but they picked up 100% of the tab for my medical benefits. At the time I was a healthy individual, then a couple years after I was laid off I found out I have Crohn’s disease. After a couple week long stays in the hospital, and $30,000 bills that accompanied them, I realize just how important medical benefits are when looking at a total compensation package! This becomes even more important when you work for yourself. You are responsible for both your portion and the portion that your employer used to pay on your behalf. Also, large corporations are able to secure much better rates than a self-employed individual would receive, simply due to the number of participants they enroll. My in-laws started their own business several years ago, and I remember discussing their premiums last year. They told me they pay $1,500 a month for coverage, and still have  $5,000 deductible each year…YIKES! In all likelihood they are paying $20,000 or more each year for health coverage, and they are healthy people.

Retirement contributions are probably the next most important thing I can think of. I don’t want  to work forever, I’d like to know there is a silver lining on the horizon, and that I will be able to achieve a comfortable retirement while I am still relatively healthy. My wife and I max out both of our 401k’s, as well as her 403b (she is a teacher). I also take most of whatever I make from blogging and put it into a SEP IRA, which is a special IRA for self-employed individuals, even ones that have a steady day job. It means that we sacrifice now, with the exception of our expensive doggy, for a more comfortable retirement in the future. Now consider that I left my job today and took on self employment full time. Forget about the loss in salary and let’s just consider their generous 10% retirement contribution I would lose out on, as well as the fees of managing my own 401k account. I’d probably set my retirement age back 5 – 10 years at least. I am only 34 right now, so that is a couple decades of lost contribution that I would be missing out on. 10 years of my life is a long time to spend working if I didn’t have to. Again, for those of you thinking about changing jobs, this is something you need to consider as well. And if you are one of those people with a 401k match available through your employer and you aren’t taking it, don’t even get me started! I was there once, right out of college I didn’t think I needed to start saving so young. After all, I had student loans and credit card debt to pay off. I held off contributing the first couple years, and I am probably going to end up working a few extra years because of that.

Income diversification is important, and I learned just how important after I lost my job several years ago and was left with a large mortgage payment and a mountain of debt. I truly never thought it possible that I could be laid off, I was always considered a young talent at any employer I was with. But the recession spared no one, myself included. I had zero money coming in other than a small severance package that would run out after two months. Fortunately I found a good paying job just as my last severance check came in the mail. A few months later I decided to try my hand at blogging as a side business. It hasn’t made me a millionaire by any means, but it has provided a little extra income that I can stash away in savings, and should I ever lose my job again I have another source of income! If you are starting a new business then give yourself a few years of building it up while continue working your day job. You might have to work a few extra hours than you would like, but it leaves so many more doors open to you.

If anyone has any questions, comments, concerns just shoot me an email or comment on here and I’d be happy to address them!

 

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