There are many myths about being self-employed. These myths often get in the way of becoming self-employed, because people are unduly afraid or think it isn’t an option for them. Others launch their own business without a full understanding of the realities of self-employment, setting themselves up for an even greater challenge. The solution in both cases is to educate yourself. Here are 7 common misconceptions people have about being self-employed.
There’s Little To No Risk
Starting your own business is a risk no matter what. However, you can take steps to manage the risk. You can choose to invest your own money and put in sweat equity instead of borrowing money, for instance.
There’s also the greater risk you face because you’ve stepped away from conventional safety nets. As an employee, you have a regular paycheck unless your employer lays you off, and chances are you have health insurance. When you’re self-employed, you have to arrange and pay for the insurance coverage yourself.
The only way to mitigate this risk is by building your own safety net. So, start an emergency fund and start planning for retirement now, and begin to look at options like defined benefit plans for the self-employed.
In this article titled “14 Reasons to Set Up a Self-Employed Defined Benefit Plan in 2020” Saber Pension explains the benefits of a defined benefit plan. You’ll learn how much a high-income self-employed person can contribute and the tax advantages of a defined benefit plan over an IRA or 401K. They also explain options for growing the defined benefit plan, whether you want to include your spouse or your employees.
It Takes Too Much Work
Remember that you don’t have to do it all yourself, and you shouldn’t either. You can hire employees to help, and you could hire an accountant or attorney when you need expert advice. Build a team you can trust, and be willing to ask for help.
Don’t be afraid to ask your partner and your children to help out, whether they do more work around the house or aid you in running the business. Being self-employed doesn’t have to involve insanely long working hours or high levels of stress.
It Doesn’t Require A lot of Work
Far too many people think that they can earn a full-time living sitting part-time in front of a computer in their pajamas. Expect to work hard to attract clients and earn a decent living. You may find it easier to get into the right mindset if you change out of those pajamas and into a professional outfit. Recognize that while you can take a vacation whenever you want, you probably won’t be paid for it.
Self Employment Is Lonely
Know that working for yourself doesn’t equal being lonely. You could work with other freelancers in co-working spaces. Meet your clients in person in many cases, like in the case of independent contractors or consultants. You could also attend networking events if you want to and start building a list of contacts.
You’ll Love Every Minute Of It
Popular culture says that you’ll only feel happy if you follow your passion and start your own business. Unfortunately, that’s not entirely true. Yes, half of the independents say that becoming a freelancer gave them the ability to pursue their passion; however, running a business can be stressful. Few people enjoy paying the bills or sending out invoices. While it can be thrilling to hire your first employee, you’re also taking on the task of managing an employee.
There’s No Career Growth
One variation of this myth is that many people become self-employed because they can’t find a so-called real job. However, surveys show that two-thirds of independent contractors actually chose this lifestyle. Furthermore, a majority would prefer to remain self-employed than return to a conventional job.
Another version of this myth is that you can’t have career growth once you strike out on your own. In reality, it becomes your responsibility to learn new skills and grow your network. However, you have the opportunity to expand your business or move into a new field.
You Won’t Earn Much Money
There is a germ of truth to this popular misconception. Contractors only get paid for the work they do. If you can’t bring in clients or projects, you may not have an income. However, contractors who can bring in a steady stream of clients earn more than their peers. As an independent contractor, you’re free to set your own rates. The average independent contractor earns $65,000 a year. For comparison, the median family income is $56,000. On the other hand, there is a common misconception that becoming a contractor is expensive. In reality, you may only need a desk and a computer.
Being your own boss and having the freedom to choose your next project can be rewarding. However, you need to know the truth about self-employment so that you can manage the challenges that come with it.
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