The advantages to self employment are great when it works out, but there are a lot of disadvantages. For most of us it’s not a perfectly smooth road. Paying attention to the disadvantages helps you to deal with them as they come up.
1. Erratic Income
This is a disadvantage many of us deal with, particularly in the early days but it can also hit people who have been working for themselves for some time. There’s no guarantee of income when you work for yourself and there’s no guarantee that it will be enough to pay your business expenses, never mind living expenses.
2. Higher Taxes
When you work for someone else, they pay a part of the taxes due on your income. You will be responsible for all of your Social Security taxes. You may have to pay taxes or fees locally as well for the privilege of being in business.
If you’re doing at all well, you’ll need to pay taxes quarterly, not just filing annually. It’s not too hard if you know what you’re earning and can estimate what you should be paying each quarter, but if your income goes up and down a lot this can be challenging. It’s also tough if you’re just making enough to get by before taxes. They still have to be paid.
3. No Benefits
When you work for someone else, they often offer benefits such as health coverage, dental, paid days off, retirement funds and so forth. You have to pay for these yourself if you work for yourself. Health and dental aren’t so bad if you have a spouse whose job offers them, but they’re pretty tough to handle on your own.
4. Having to Collect Payments
When you work for yourself, you have to collect the payments due to you. If a client or business fails to pay you, that’s a direct impact on your income.
5. Maintaining Your Own Equipment
Whatever you need to run your business, a computer, an internet connection and so forth, they’re your responsibility and your expense. When problems happen, you have to take what could have otherwise been productive time away and deal with them.
It’s Not All Bad
These challenges don’t mean give up on the dream of working for yourself. They’re just something to be aware of, so you don’t get caught completely off guard. For those who enjoy working for themselves and the many opportunities that brings, the advantages far outweigh these disadvantages.
Flexibility, the potential for a significantly better income than at a job, the fun in taking the risks, being your own boss… being self employed is something I wouldn’t trade. The difficulties are only a small part of the story.