3 Potential Downsides to Self-Employment
Before I start this post, please let me just say that I absolutely LOVE being self-employed! I’ve spent pretty much all of my working life as a self-employed person and I really wouldn’t change it for the world. There is nothing like embarking on a new business project only to watch it turn into an income, and sometimes even provide an income for others too.
However much I love it though, I have to admit that self-employment does have some potential downsides. Here are just 3 for you to consider if you are thinking of making the leap from employment to self-employment.
Instability of Income
In the early days of self-employment it is possible – or even quite likely – that your income will be somewhat unstable. Some months you might be snowed under with work and your clients may have paid up all of their invoices and life will feel good! There may be other months however where things can get a little hair raising. As time moves on and your business progresses, you should get better at managing these fluctuations in income and hopefully it won’t seem like much of an issue anymore but in the early days there is no denying that it can be tough. We should also mention the lack of holiday and sick pay for the self-employed here too.
Tougher to get credit
As much as we don’t like to encourage people to take on needless debt, there are certainly times when it can make sense or even be necceasry for you to take out some kind of loan, be it a mortgage or standard loan. It is well known that being self-employed can make it tougher to get credit. Even the previous head of the Federal Reserve (the equivalent of the Bank of England here in the UK) Ben Bernanke found he was unable to refinance his home recently because his income was viewed as being unstable – even though he can earn around $200,000 just for making one speech.
There are things you can do to help your case here like using the services of a chartered or certified accountant and if you’re still struggling then specialist self-employed loan lenders like Evolution Money may be able to help, but if you have just ventured into self-employment then you may find it very difficult to get a loan in those early days.
Maintaining a Good Work Life Balance
One anomaly of self-employment is that in theory, it should be much easier to maintain a good work life balance. How many times do you hear stories of people who ventured into self-employment expecting it would lead to more quality time with the family, only to find themselves working more hours than ever before? This can happen for a number of reasons.
One reason could be the instability of income mentioned in our first subheading. When you’ve had a bad month or two and then suddenly you have a flood of work offers, you may feel that you have no choice financially but to work every hour under the sun for a while to bring some money in.
Another reason might be the sheer amount of effort it can take for you to get a business off the ground. Time spent marketing, networking and building awareness for your brand or company can really add up. In the end I do think that it is worth the effort, but in the long run it is important to find a work life balance that works for both you and your family.
As I said at the start of this post, I love being self-employed but it is wise to take both the positives and negatives of self-employment into account before making the leap.