Few things are as glorified in modern America as the idea of working for oneself. Perhaps you have a self-employed friend who posts photos to Facebook of their laptop in the foreground with the pool and palm trees lingering in the background. Self-employment can be fulfilling and liberating, but it does come with drawbacks, and you must be prepared to face these trials and tribulations if you want to truly enjoy the fruits of your own labor.
Self-employment does allow you to set your own hours, free yourself from office politics, and profit from your own productivity, but there are some cons to being self-employed, issues that you should be aware of before telling off your employer and leaving that dreaded cubicle for good.
Employers Pay Half of FICA and Social Security Taxes
Wage-earners and salaried employees pay half of the FICA tax, while their employer pays the other half. If you are a self-employed worker or an independent contractor, you assume responsibility for the whole FICA contribution. If you work for yourself, you are viewed as the employee and the employer and assume the tax burdens of both. Budget and plan accordingly.
No Unemployment Benefits for the Self-Employed
The requirements for collecting unemployment benefits vary by state, but the vast majority of self-employed workers in the United States do not qualify for unemployment benefits since they do not contribute to the unemployment insurance fund. Keep this in mind before going the self-employed route. If you choose to work for yourself, ensure that you have a nice nest egg to draw from should business dry up since you likely won’t be eligible for unemployment benefits.
What Are Vacation Days, Sick Days, and Paid Time Off?
Full-time employees accrue a certain number of vacation days, sick days, and paid time off as they continue their tenure with their employer. These benefits allow employees to live a well-balanced life and take care of personal obligations without worrying about their paycheck. If you work for yourself, you will have to budget accordingly for such luxuries as the days you are not working mean you are not generating income for yourself. This can be daunting, but self-discipline is key to being successful as a self-employed individual.
Always Be Closing? Always Be Selling
Sales managers tell their sales associates to always be closing and the same rule of thumb applies to those who work for themselves. It does not matter what industry you are involved in. You can be a self-employed writer, filmmaker, wedding planner, operations consultant, landscape architect, etc. It doesn’t matter. You need to always be selling yourself and your services. Networking is key and you are your own business when you work for yourself so put your best foot forward and don’t let an opportunity to make money slip by you.
Write-Offs Aren’t as Sexy as They Seem
As a self-employed person, I always hear my friends tell me about how I must enjoy the write-offs. What many people don’t understand is that write-offs are nice but they are designed to offset the actual costs of doing business and are nowhere near as generous as they were in the ’80s. So, yes, you can claim things as tax write-offs, but you also supply all of your own office materials and other business supplies necessary for day-to-day survival. Printer paper, invoices, and pens get expensive, people. You take this for granted until you take over the expenses of your own personal business operations.
File Your Taxes Every Quarter
Many people groan at the thought of filing their annual income taxes. Imagine going through that process on a quarterly basis. This is what some would call #SelfEmployedProblems.
More from this contributor:
The Top Five Best Family Cars for 2014: Car Buyer’s Guide
College Graduate and Young Professional Advice: 4 Status Symbols to Avoid in Your 20s
4 Ways to Grow Your Business and Increase Your Sales