To some, being self-employed is a dream. However, as well as should know by now, nothing is ever as great as it seems at first Whereas this seems like a good idea and a solution for people without proper jobs, not everyone is prepared for the challenges that come with it.
Self-employment goes beyond working on your schedule or following your passions. It comes with so many responsibilities, challenges, and sacrifices, not only for you but for your family members as well.
If this is the direction you would like to take, then you must understand both its pros and cons. Without wasting much of your rime, here are the financial downsides of being self-employed.
No Financial Security
This hits hard, especially in the first months when you have unsteady paychecks. With this, you might have to keep chasing invoice payments to manage your cash flow. Unlike traditional jobs where you are guaranteed a salary at the end of the month, here you are on your own.
You lose pay for leave, insurance, and even pension contributions. If you borrowed vast sums of money to start your business, you have to figure out how to pay it all back. This is regardless of whether your order book is full or empty.
Embrace Unsteady Pay
When you are working a typical nine-to-five job, you are assured to receive a specific amount at the end of the month. However, when you are self-employed, it’s more like a business where you are not sure of how much you earn. You can even make nothing at the end of a month.
Keep in mind that your monthly income will depend on your workload. As such, what you are able to earn will be resting entirely on your shoulders. That being said, some times are just more lucrative than others.
Hard To Save For Retirement
Many employers offer great retirement perks for working at their company. However, if you are self-employed, there is nobody to offer you such benefits. This is something that you may want to seriously consider before you become self-employed.
You can save and get yourself all these benefits. However, this is not always easy. In fact, when you are running your own business, this can be quite challenging.
Paying Your Taxes
Taxes are one area that catches most people off guard. Whereas employees don’t feel much of a pinch paying taxes, self-employed individuals face this head-on. You have to pay these taxes on your own.
Taxes are not as bad as most people think. However, if you don’t have a steady plan in place, it becomes a disadvantage to be self-employed.
No Paid Leave Or Vacations
You remember the time you used to enjoy paid for leaves and vacations? Well, now there is no such thing as paid time off. Though you can still take days off and have a good time, keep in mind that all expenses will be on you.
You have to consider many factors before digging deep into your pocket. Do you have enough income to sustain you? Will your business even survive after your vacation? Weigh your priorities before you make a decision.
Bottom Line
Being self-employed can be a joy and a curse at the same time. However, with proper plans and a vision, it can be the best thing that can ever happen to anyone. If you are planning to be self-employed, it's essential to prepare yourself for whatever might come up in the future. Also, remember to consider the financial downsides.
