One of the most essential aspects we require in modern living is security. Now, as there is so many precarious positions to be in, from a financial perspective, we crave that comfort blanket to keep us secure as we age, so we can enjoy the benefits of retirement at a decent age. But, there are those out there who finds that the trappings of being employed, with all of their apparent perks, somewhat stifling. It seems that now, with the rise of the gig economy, more and more people are going down the self-employed route. There are many reasons in which to do this, from the freedom you have to set your own hours, all the way through to a more balanced outcome in relation to your work and your life. But, being self-employed, for all of its positives, do throw up some negatives. So, what are these?
The instability of earnings
This is, arguably, the biggest concern for anyone out there who has dreams of going self-employed. Because the very nature of the beast means earning a hefty load one month but a meager one the next, this requires a substantial amount of financial planning. If, for example, you wanted to set up your own business, the best approach is to set up some savings well in advance. This isn't the answer most people stuck in a dead-end job crave, but it's the most viable solution. Especially as those people keen on starting their own business will struggle for, at the very least, the first year. Even for those people who are freelancers, the amount of legwork that goes into securing your own contracts, means that you need a rainy day fund, should there be fallow periods. Put simply, it's a feast and a famine. And the best way around it is to prepare yourself, financially, but also, mentally.
What happens if you get sick?
If you don't work, you don't get paid. Getting sick, for so many self-employed people, is, very simply, not an option. If you are a freelancer, you will see every penny you get paid go into your bank account, so you know exactly how much you have to play with. But it's not a pleasant position to be in when you are unwell, and you have no choice but to turn down work so you can recuperate. This is a dichotomy in the mind of a freelancer, because you will feel guilt in not being able to work, because of the financial impacts on your bill paying, but also, you worry about the lack of momentum being away from work generates. There are insurance companies out there that provide sick pay for self-employed people, and it's definitely worth checking these out. A company like Wage Protect can help in this respect, but what about if you can't afford cover and you end up being off work for a long period of time? We aren't invincible, and we could very easily get caught up in an accident. And while it's not an ideal situation, relying on family members to help you through financially could be your only option. Of course, there are ways to get legal compensation, depending on the nature of the accident, firms like the Chester Law Group help people out if caught up in an automobile accident, or have extensive injuries as a result. But getting sick is one of those concerns that everyone has when they go self-employed. The most immediate solution is to undertake an MOT with regards to your own health, so you can best prepare yourself, and you can be in peak physical health. Ultimately, the healthier you are, the more you will be able to work. Being self-employed throws up these types of questions, which most people don't think about when they are in full-time employment, primarily because they get sick pay. It's important that, regardless of the line of work you're in, that you are as healthy as you can be.
Holiday pay (or lack thereof)
Holiday pay, again, is one of those things that are non-existent. A lack of holiday pay does mean that you are taking more control over your earnings, but also when it comes to issues like the tax bill, you need to make sure you set money aside. It's far better for you to adopt the mindset of saving little and often, rather than living a hand to mouth existence. This is quite difficult at the outset, especially when you're trying to find your feet in self-employment, but this means you have to address the financial aspects of your lifestyle. If you like to socialize, instead of not being able to go out the month your tax bill is due, cut back one might a month, and you can reap the benefits of both. You have money to pay the tax bill, but also you will be able to enjoy yourself. Part of the reason you go self-employed is that you have more control over your life. But, a lot of people can't marry these aspects. And these people soon go back to the “comfort” of a job. So it's better for you to adopt the mindset of when you would like to take a break, and save towards that. Being self-employed can feel like a treadmill that you cannot get off, but this will only wear you down after so long.
Planning for the future
And for those just starting out on their self-employed journey, the big question most people ask is: how they can save for the future? Well, it's about adopting the mindset of saving first, but it's being clever in your lifestyle, but also being savvy in terms of how you earn your money. You might want to pick more lucrative contracts, for example. But it's better for you to start investing a small percentage of your earnings into stocks, bonds, real estate, and so forth. You might not have the money to begin with, but this is an essential aspect of earning money nowadays. The stock market can be a complex beast, but the sooner you start learning about it, the better it is for you in the long run. You don't want to be working until you are 90, and drop dead the day after you decide to retire!
Self employment is an option lots of people are turning to after the financial crisis of 2008, and we are still feeling the effects of this now. But, for all of the financial concerns you can have in self employment, as long as you're aware of the emotional and financial costs of it, you can better prepare.