If you are part of the 85% of people who hate their jobs, maybe it is the time to consider self-employment. Of course, being self-employed comes with a lot of risks. For instance, a bad month cannot guarantee you a salary. When working in a conventional job, you generally know how much money you’ll be getting every month.
In self-employment, the pay can be a bit unsteady and erratic at times. Furthermore, when it comes to healthcare, retirement and other business expenses, you are entirely on your own. As someone that is classified as self-employed, you’ll become solely responsible for your 401k. There will be no matching contribution from an employer.
On the other hand, self-employment leaves us so many things to love. You have the freedom of choice, and you make your own decisions are the biggest advantages of being your own boss. You set your work hours and never, as in never, will you ask a superior for vacation time for family events and vacations.
The benefits of self-employment can far outweigh the drawbacks. Here are some other advantages of being self-employed:
Being self-employed, you’ll get to learn how to pay the self-employment tax, which many people dread to even think about. And paying taxes is never fun. Fortunately, the Internal Revenue Service or IRS allows you to claim certain tax deductions from your Adjusted Gross Income or AGI to reduce your taxable income. These privileges are exclusive for self-employed individuals.
This tax break allows you to deduct a portion of the expenses you incur for business purposes at home. These expenses could range from the money you spend to gain new skills for your business, that sofa purchases for your home office or the expenses incurred for the business use of a car. The government also encourages all workers to save for retirement. This is another way to lower your tax bill. Self-employed individuals can qualify for additional deductions by making contributions to SEP-IRAs, SIMPLE IRAs and other tax-deferred plans like individual 401k accounts.
The Sky is the Limit for Income Potential
Yes, this is probably the greatest advantages of being self-employed over being an employee is the ability and the potential to scale your business and earn an income limited only by your efforts. Unlike most corporate jobs, your salary does not have a cap.
The only challenge is that many new businesses fail in their first few years. The SBA states that 30% of new businesses fail during the first two years from their launch date and 50% fail within their first five years. However, not all businesses need to fail.
With the right planning, flexibility and funding, many self-employed individuals can have the potential to make the greatest earnings.
Savings in Transportation, Clothing and Food
Commuting costs vary from state to state. But on average, adults in the US spend as low as $2,000 to as much as $5,000 annually on transportation to get to work each day. And the US Census Bureau states that it takes some 50 minutes for an employee to travel to work every day.
Believe it or not, people spend a lot of money on transportation, dry cleaning, food, and everything else in between just to get to work. While this is not always true for everyone, the ability to save on these expenses are much higher when you can work from the comforts of your home.
The freedom and the opportunities that self-employment allows is hard to quantify. It is no wonder that approximately 550,000 people decide to give entrepreneurship a try every month. The flexibility, the tax savings and the unlimited potential – these should be enough to make you gamble on self-employment.