Anyone who’s worked for a corporation has had plenty of moments where they wish they didn’t. Bosses make ridiculous demands; co-workers procrastinate and make you pick up the slack; no one listens to reason when you tell them the obvious. It would be so much easier to succeed if you had the authority to call the shots. The movie Office Space is so funny because while the characterizations seem exaggerated on-screen, they’re actually very close to the real thing.
1. Get Paid What You’re Worth
If you’re on salary or hourly wages, you’re likely not getting paid what you’re worth. Your job title and job description determine an acceptable “industry standard” salary range, and your potential earnings have an upward limit. If you’re lucky, your pay structure may have an additional bonus or performance-based compensation component, in which case you’re probably getting underpaid on your regular salary (because if you happen to meet all your goals and achieve the full compensation, HR wants to make sure you’re not getting overpaid).
If you work for a company and come up with an idea that makes a million dollars in profit, how much of that goes into your pocket?
When you work for yourself, you get to keep the full benefit of your labor and ideas. Your earning potential is not capped.
2. Follow Your Own Passions
How much do you love your current job? If you didn’t get paid for it, would you still be interested?
Even if accounting or marketing or programming or whatever you’re doing now isn’t the love of your life, you’ll be much more passionate about working when you’re doing it for yourself.
3. Fire Your Boss
C’mon, you know you’d like to do it. No more taking orders. Answer only to yourself, not to the CEO’s dimwit brother who knows less about your job than you do.
4. Make Your Own Schedule
Last December I planned for a month-long vacation in February. Got the departmental approvals and had wonderful time in Thailand. In March, HR informed me that my vacation days were at -5. I lost 40 hours in January because there was a cap on how many I could roll over from the previous year. “You signed the employee handbook when you started working here, so you should have known.” Apparently, the signed approvals I got before the new year didn’t mean anything anymore, and it’s all my fault. Essentially, I owe my company money now (paid in lost vacation).
The self-employed often work harder, but at least they can make their own schedule. My suggestion - arrange your work schedule to allow you to spend more time with your family.
5. Work During Your Peak Performance Times
I always told myself that if I started my own business, my employees - those that were information workers - would only work 4 hours per day. Why? Because I know that if I could leave work after four hours, I would get more done than all the other people in my department who worked for eight.
Forcing people to work for a specific period of time doesn’t improve productivity - quite the opposite. Self-employment allows you to work during those times when you know you’ll be most productive, according to your natural productivity cycle.
6. Reduce Your Tax Burden
Working for a corporation provides you with one of the harshest tax burdens available. First, the corporation gets taxed, which they pass on to you by limiting your salary. Then, the government taxes you again, seizing your wages before you even get a chance to touch it. Essentially, you suffer from double-taxing.
By going the self-employed route, you can reduce that tax burden significantly. By structuring your business entity properly, you can avoid double taxation altogether (e.g. as a sole proprietor, where you would just report your earnings as income). Even if you set yourself up as a corporation, you can keep your salary low and reinvest most of your profits in the business, thus reducing the income portion of your tax burden. The point is, you at least have some options that wouldn’t otherwise exist as an employee.
7. Write Off Expenses
This relates nicely with #6. As a business owner, many of the daily activities you perform and pay for can be deducted as business expenses. Taking clients out to lunch, business-related traveling costs, a percentage of home utilities (if you keep a home office) and expensive computer equipment can all become write-offs. Expenses help reduce your taxable income, thus reducing your tax burden. For instance, if you’re a sole proprietor, this directly reduces your adjusted gross income and can help put you in a lower tax bracket.
8. Stop Trading Your Time for Money
The whole premise of employment puts you at a major disadvantage. If you’re getting paid only for the amount of time you work, then you’re not reaping the full potential of your labor (your employer, on the other hand, is). By working for yourself, you can easily find ways to generate income even when you’re not working, thereby placing value on what you create, not on the amount of time it took you to create it.
9. Secure Your Future
Your employer only needs you as long as you’re giving them what they want. The idea of “job security” is an illusion. It can all end with just two words: “You’re fired.”
If, however, you’re self-employed, then you’ve effectively saved yourself from ever being in a position where you can be fired. If you under-perform, I suppose you could always fire yourself. But, since you’re the boss, you can immediately hire yourself to another position.
No job is as secure as the one you make for yourself.
10. Own What You Create
When you work for someone else, your value is marginalized and they reap the long-term benefits of your labor and ideas. You are just a unit of labor; your production is their property. Why be a slave?
If you’re already working your tail off, why not own the output?
11. (Bonus!) Freedom
This one sort of encompasses all the rest and really gets to whole point of self-employment.
Working conditions. Location. Style. Office decorations. Availability. Work philosophy. Priorites. Hours of operation. Scale. Goals. Mission. Anything. Everything.
When all is said and done, you are your own master.
ian douglas wrote,
Great list!
I dropped out of the Corporate Game in the spring of 2006 and haven’t regretted a moment of it — I’ve made more money, been more productive, worked on more interesting things, and have had way more free time (not having to commute so much) than I ever did in the 10 previous years since graduating college.
I can write the kinds of software *I* want to write, and love #10 of owning what I create instead of someone else laying claim to every idea in my head.
And having been in the business for 10 years doing freelance programming only on the side, I now have a client base so big, I have enough work to fill as much (or as little) of my day as I want — I can turn away work if I don’t think it’ll be interesting (or subcontract it out). I no longer need to hustle for work, as my previous clients’ “word of mouth” is all the advertising I need.
I need to disagree somewhat with #6 though — as a sole proprietor in my income range, I’m actually taxed about 45%-50% of my income, where as a corporate lackey I only lost about 30% AND got benefits like health care, something you don’t mention in your list. If you want the same level of health care you had as a corporate employee, expect to pay hundreds of dollars per month, double that if you have a spouse and kids.
Granted, #7 is a valid point, you get to write off lots of expenses. My favorite: lease a car for your business — 100% of the cost (lease, insurance, gas, maintenance) is a tax deduction. Still, I have to put a large amount of my income in a high-interest savings account of some kind until next April when I hand it all over to the gov’t.
But sure beats having someone micromanage over your shoulder and getting a 1% raise every year.
John wrote,
Thanks for the comments Ian, and congratulations for finding success going solo.
You bring up a good point with number six. If you’re making good money on your own, you really need a lot of expenses to bring your income down into a low tax bracket. Although, from my point of view, corporate employees are paying a lot more taxes than what appears on their W2. That’s because the company is paying taxes, and you can bank on the fact that their loss in money to the government is heavily factored into your salary.
As far as the health care goes, that’s part of my next post, “10 Reasons to Keep Your Day Job.”
But I think your last point really sums it up - freedom to operate as you please and no artificial caps to your earning potential.
10 Reasons to Keep Your Day Job wrote,
[...] assumption in all of this (in general) is that you really do want to quit your job, but you’re just not sure if it’s the right time yet. I assume this because I [...]