There is a common thought most people have about employment. If you want to get rich, you can’t work for someone else. I’m not so sure I buy into this theory anymore. There are benefits to being self-employed of course. But there are also benefits to working for ‘the man’. Let’s take a look at why you don’t have to be self-employed to reach your goals.
First of all, I’d like to point out that I am not self-employed, but my older brother is. He is a realtor and doesn’t do bad for himself. Currently, he makes about double what I make a year on average. He has also been trying to get me to join him. I’m good with numbers so he has pushed for me to become a broker, and I’ve declined it on several occasions. I’m a big believer that you don’t have to be self-employed, and it’s hard for him to argue because of my successes. These are the main talking points I’ve brought up.
I love a steady income. I work on salary and commission and I know how much my salary checks are going to be. His life is a bit different. He is either on a trip staying at the nicest hotels available, or he is eating off the dollar menu at McDonald’s.
I’ve tried to help with this. I’ve told him to pay himself a salary to avoid this mess. Unfortunately, thats either said than done with some people, and he hasn’t done it. He doesn’t have the predictability that I do, which influences his spending.
Let’s face it, 401k plans are awesome. I get matched 100% up to 5%. That’s free money! He has an IRA of course and that helps, and he just recently decided he would do everything in his power to maximize his contributions every year. Even then, the max for an IRA is $5,500 a year. With the math, I put into my 401k about $2,000 more a year, and a lot of it comes from my employer.
I show up to work, do well, and leave. He works home in his pajamas a whole lot. It is definitely appealing, I’ll give him that. But people walk into my job and I help them. He needs to generate business. Last year, He spent about $12000 in advertising. It brings him good money of course, but you have to take that into consideration when you are thinking of the net profits at the end of the year.
Health Insurance is expensive. It gets even more expensive when you have a family. We both have 1 child and a wife to add to our plans. I pay about $60 a month and add another $240 to my HSA. He pays close to $700 for insurance alone.
For the most part, he wins this round. He works when he wants to and as much as he wants to. Obviously the less he works the less he earns. That is a big factor to consider. My dad used to own his business, and the day his mother passed away, one of his employees quit. He couldn’t even mourn, he had to keep the store open that day. Time might be more flexible, but I get sick days, personal days, even bereavement days paid for.
This one comes down to what you do. My brother is a realtor. His responsibility is to make sure he calls his clients back in a timely manner. If you own a store or restaurant, it’s to make sure your clients are happy, and the employees are doing what they are supposed to. Mine is just to show up to work. If my office blows up tomorrow, it’s none of my business.
He wins this category. You don’t have to be self-employed to make a lot of money, but you are usually stuck in a pay range. I can make $12,000-$30,000 commission a year. It’s a big change, but I know my pay range will be that plus my salary. My brother can earn 0 next year, but there is nothing that stops him from earning a million dollars either. I’m not saying it’s easy, but with the right clientele, it could be done.
Want to open up your shop or restaurant? Plan on having employees? We’ll get ready to pay taxes for each employee you hire! The numbers here add up quickly, and that’s not even talking about benefits you might want to offer them!
I work for a bank, meaning I get free stock trades and no front charge on mutual funds. That makes a hell of a difference when it comes to my investments. It has literally saved me thousands. He will pay at least $245 a year if he maximizes his IRA and invests it.
I also got the benefit of paternity leave at 100% of my salary. Unfortunately, if he doesn’t work, he doesn’t get paid.
You Don’t Have To Be Self-Employed
The bottom line is, you can do well for yourself, even if you are never self-employed. If it’s your dream to be self-employed, go for it! But don’t beat yourself up just cause you work for a corporation. Keep fighting for that retirement because most self-employed people are trying to do the same thing!
What are your thoughts on Corporate vs. Self Employment?