I’ve been self-employed for many years now, and I’m so thankful that’s the case. Why? Because in today’s recent economic uncertainty, I’ve realized just how much self-employment is more financially secure than a day job. I’ve learned that when you work for someone else, you can’t rely on them for your financial stability. With that in mind, I’m going to dive into the details of why independent contractors have a financial advantage over W2 workers.
Self-Employment vs. Employee – Financial Stability Comparison
How people view a stable job vs being self-employed is much different than it was years ago. Working for yourself was sometimes looked at as unstable, and maybe even as a lazy way to avoid working 9 to 5. This can’t be further from the truth because the self-employed are actually hard-working individuals who have a goal or dream that is beyond sitting at a desk from 9 to 5, making someone else money. They want to build up their own career and make money for themselves – without constrictions, income caps, or limitations.
There is nothing wrong with being an employee, but if you are an entrepreneurial-minded individual, who wants to take 100% control of your financial stability, then heading down the path of self-employment might just be the right choice.
Let’s take a look at 5 reasons why being self-employed as compared to an employee, can give you the financial security you might be looking for:
1. Employees Lose 100% of Earnings if Let Go While Entrepreneurs May Lose a Small Percentage
When you work for a company as an employee, it feels secure, but what happens if you’re laid off? Your security is left at the company door on your last day. This means that you just lost 100% of your income stream. That’s a very scary position to be in. On the other hand, when you’re self-employed and lose a client or a project, you will most likely have other clients or additional streams of income.
What it boils down to is that an employee will lose 100% of their wages, while a freelancer may loose 10-20%, depending upon how they have things set up. This alone makes working for a company a risky and financially unstable position to be in.
2. Economic Disasters Can Shut Businesses Down Leaving W2 Workers with No Options
When the COVID pandemic took over the world, an economic disaster hit that left businesses in a position where they could no longer survive. Many companies had to close up shop for good. Along with this came millions of employees without jobs, with some waiting months for their unemployment to start rolling in. This has a big impact on the ability for some to pay their rent, bills, or even buy food and other essentials. These employees were (and most still are) in a position where they have no control over their financial situation – they relied on the company for their income, and then they had to rely on the government for money. What if both the company and the government do not come through for you, then what?
The Point Where I Realized How Thankful I was to be Self-Employed
To stress the point of how self-employment is more financially secure than a day job, I want to provide an example from my own experiences related to the pandemic. I read about how so many people were losing their jobs, and how they were struggling financially because of it. However, I didn’t fully understand the situation until it happened in my own household. Because of the pandemic, my spouse was furloughed, along with half the people in his company. So there we were, waiting and waiting for his unemployment to no longer say, “Pending”.
As the weeks went on, with no word from unemployment, I started to get nervous about the fact that I might have to pay for 100 percent of the bills. It was at that point where I realized, “Wow, what if I had a day job and I was let go also?”. If that would have been the case, then we both would have no money coming in while the unemployment office was backlogged with millions of applications. It revealed just how scary this type of situation really is for all those out there who have just lost their job.
Thankfully, I have several streams of income as an independent contractor, and I didn’t lose any work. If I did happen to lose a client, I could have easily obtained more work from the freelance platform I use that has hundreds of projects popping up each day, from companies all around the world.
My spouse got his job back, but only him and one other, the rest were let go. We were both thankful that he was asked back, but if the pandemic flares up again, he could be at risk of losing his income stream a second time.
3. The Self-Employed Have Control Over the Rate They Charge – Employees Are Often Capped
Another reason that self-employment is more financially secure than a W2 job, is because as an independent contractor, you have total control over the rate you charge. For employees, depending on their line of work, they are at the mercy of the going rate for that industry, their employer’s budget, and many other elements.
You will also want to factor in job competitiveness. I’ve seen ads for web designer jobs that list a whole host of high-level responsibilities, only to offer a measly $13 an hour, where in reality, it should be $35 to $65 an hour. Why is this the case? Because there are tons of web designers out there, flooding the market, therefore, driving the wage down for that particular type of company job. If you’re in a line of work that’s competitive, you might just have to settle for lower rates as an employee. Or, you may be in another line of work and make a decent wage, but have no opportunity to make much more because you have already reached the income cap within the company, or within the industry.
The Sky is the Limit When You Work for Yourself
If you go the route of freelancing, you can pick and choose your clients and projects based on the level of pay they are offering, and you can set your overall rate so that it reflects what you think you are worth. There are no limits or caps. Once you reach a certain level, you can revamp things a bit and raise your rate even more based on what you can offer. Or, you can pick and choose what you want to teach yourself, to “up your skills”, so you are more valuable to clients.
This statement really sums it up, “I’m doing the same line of work that I was doing at my day job, but now, I’m making 3 times the amount of money.” I was severely underpaid at my last W2 job, and so was everyone else in the company. Working for yourself gives you a huge opportunity to earn the amount of money you feel you should be making, an amount that reflects your talents, your schooling, and your level of performance.
4. If Extra Money is Needed Independent Contractors Have the Option to Work More Hours
When I worked for a company as an employee many years ago, I felt certain things were out of reach. I needed a few expensive items, but knew it was impossible to obtain them because I had a set income, and there just wasn’t enough leftover at the end of the month. Oh, and if a big emergency arose, where extra funds were needed right away, there was a zero chance of raising that extra money, especially on short notice, because I had my set 40 hours and my set pay rate, and that was it.
Now that I have been emerged in the world of freelancing for many years now, I can really see the difference in how being self-employed is more financially secure. If an emergency were to arise today, I don’t have to call a relative to borrow money. I can either do a few extra projects for my current clients, or if they don’t have the additional work, I could easily obtain a new project on a freelance platform website. Long gone are the days where I have no options for coming up with additional money for essential things that are unexpectedly needed.
5. Self-Employment Opens the Door to Creating Passive Income and Growing Your Net Worth
Self-employment offers many avenues for generating passive income. What’s passive income? It’s when your money works for you instead of you working for your money. Each case can be different, but it’s basically when you do some initial set up work, and money starts to come in on its own. Of course, there may be some maintenance work to do here and there, but it’s generally a hands-off approach to earning money.
Two examples of passive income would be selling stock photography (placing your photographs on stock sites where they are downloaded and you are paid) and investing in real estate (sitting back and relaxing as monthly rent checks come rolling in like clockwork). When it comes to investing in real estate, you don’t even have to know how to invest. You can just rely on the expertise of a turnkey provider. If you’re not familiar with the topic, you may want to read this article on the subject – 5 Things to Know About Investing in Turnkey Real Estate.
Once everything is set up for money to start coming in, you are free to work on your other business ideas – you have the freedom to take any path you want to generate income. Employees are not free to do this while on the clock 9-5. They have to focus on their boss’s goals, instead of investing time in their own financial growth. Check out our post on the topic to get a better understanding of how it works – How to Make $2,000 Per Month in Passive Income.
A Crowd Favorite for Making Money from Home
One awesome way of making money from the comfort of your home is to start a blog. You can earn money from this idea through affiliate marketing. Most people love doing this because they write about what they know best, their area of expertise, or a topic they are just interested in. For instance, if you are a lover of all things vintage, you can start a blog on the topic and write about your great finds at estate sales, and so on.
All you really need to get started is a hosting account and WordPress. You can learn more about these two items by reading over this page that covers details about a WordPress account, and visiting the bluehost website, which contains what you need to know about hosting your site. If you need some tips on how to get started creating a blog, we wrote an article on that also – How to Start Blogging with WordPress and Bluehost.
For those who are interested in starting a blog and want to find out more on how to make money doing so, check out our article titled – How I Earned Over $1,800,000 with My Blog and You Can Too.
More Just Build Wealth Articles for Inspiration
If you have been inspired by this article on why self-employment is more financially secure than a day job, to the point where you want to move forward with exploring your options, view our other articles below that are of interest to you:
- Check out these 20 home-based businesses that are simple to start.
- Find out how to start your own business so you can leave your day job.
- Need $1,000 in a hurry? Read this article for tips on how to make it happen.
Consider Self-Employment and Become Financially Secure
I know firsthand the differences between working as an independent contractor vs reporting to a day job. I’ve done both for many years. Because of this, I can say for certain that when you work for yourself, you have a world of opportunities that will enable you to become financially secure, as well as financially independent. You will also find that you become excited about the direction your career is going in, and the freedom you can experience when not tied to a 9-5 job.
Take a minute to view this video that covers a few brilliant ideas on how to make income from home with no money: