As I’ve mentioned before, and have promoted heavily in my previous posts, I am currently self-employed in several respects. I have a freelance web design business which is my primary source of income at the moment. I also have been working on several niche websites, and other website projects which I haven’t yet released. I am very happy with this, as all of these things have huge income potential. However, there are some definite downsides, which I think I should share to even out the perspective of this blog on the matter.
Inconsistency of Income
This is probably the biggest negative of being self-employed in any aspect. Virtually however you choose to employ yourself, your income will never be a perfect stable source as it is with a regular job. This recently came to light when I was applying for a credit card. They asked me what my annual income was, and I honestly couldn’t give a very good answer. I gave a rough guess that I’m aiming for, but it is incredibly unpredictable. For all I know, I could end up with ten times that amount this year, or one tenth of it. Not only does this makes things difficult for these type of situations, but it also makes it more difficult for long-term (and even some short-term) financial planning. Because you can’t ever guarantee your income, its hard to tell how much of a mortgage you can afford six months from now if you don’t know how much you’ll be making.
While there is always room for you to expand your small business, what if you ever wanted to go back to your old day job? Your self-employed gig may not earn you any more points with employers, and they won’t put you any higher up the ladder than you were before. This obviously won’t always hold true, it is totally dependent on what kind of job you want/had. However, it is definitely something to keep in mind. You may lose out on a few years worth of promotions if you try a self-employment gig and it doesn’t work out as well as you had hoped.
It can be Lonely
This can be a big deal for some. If the only time you really socialize is at the work place, then transitioning to working from home by yourself is going to be rough. However, there is always the possibility that your business expands and you get employees working for you, but it may take a lot of lonely days to get to that point. This obviously isn’t a big deal for me seeing as I’m a student and socialize primarily with school friends, but for some it could be a deal breaker.
Self-Employment Taxes Suck
It’s always nice to get that big consulting check you worked so hard for in the mail. What’s not nice is giving away a third of it to the feds. When you work for yourself, you have to pay the employer’s side of social security taxes on your income. In other words, that already big chunk of tax money you give away essentially doubles when you are self-employed.