W-2 or 1099? For many folks who dream of business ownership, that is the question.
If you must choose between a full-time job and freelancing, examine the pros and cons of each scenario before you take the plunge.
Full-time or Freelance?
Running a business has changed. You don’t need expensive office space and the cache of equipment that goes with it. In the digital age, programmers, graphic artists or writers need little more than a laptop— and maybe even a lounge chair— to earn a buck.
But you will have some trade-offs. And with the proper foresight and planning, freelancing pays dividends not always distributed by an employer. Consider the following eight benefits of running your own shop:
- Payday: Shucking that full-time job means more than saying goodbye to your boss. Giving up a steady paycheck might create some anxiety, but as a freelancer, you could command rates that reflect exactly what you’re worth, and more importantly, what your time is worth. Bobbing and weaving your way to an annual raise will no longer be necessary.
- Freedom: These days, mobility is a game-changer. Telecommuters have some freedom but there’s still that tangible tether to the home office. A 40-hour workweek is optional. Being self-employed means only having to answer to yourself— as long as you meet required deadlines. A happy client is a repeat client.
- Time management: Indeed, time management for a freelancer is a concern. Left to your own devices, you might be that person who pulls the equivalent of an all-nighter to get the job done. Yet, if your work quality doesn’t suffer, who cares? Besides, some people perform better under pressure.
- Scheduling: That also raises the question of scheduling when you're a full-time employee. Would your manager approve an hour-long coffee break at 10 a.m. with a friend who’s in town for a day? Could you take your dog to the only available vet appointment in the middle of the afternoon? Could you do whatever the heck you wanted, whenever you wanted? Asked and answered.
- Benefits: No doubt, benefits are important and health insurance is another worry when hanging your own shingle. The good news is individual health plans are available even if you have a pre-existing medical condition. And in many instances, bona fide medical policies provide preventive care with no out-of-pocket costs. If you have full-time employees, group insurance plans could be an even better deal from a premium standpoint.
- Perks: You need to do your part to stay of sound mind and body. So, giving up the gym at the worksite is a tough pill to swallow. No worries—you’ll work smarter as a freelancer, not harder. If you’re making your own schedule, finding 30 minutes or more per day to exercise won’t pose a problem. Paid vacation or family leave? Take two months off if you're comfortable with your cash flow.
- Retirement: One day, all these productive conference calls and fun projects will come to an end, and you must figure out how to pay for that trip to Bali without a steady income. Company-sponsored 401(k) plans are great retirement-funding vehicles, but you can design your own plan. Simple employee pension plans (SEP) let you contribute to retirement AND reduce your taxable income.
- Taxes: Since the subject of Uncle Sam came up, you’ll also find a bevy of new deductions—home office, entertainment, business travel, etc.— to help minimize your year-end or quarterly tax bills. You'll have more opportunities than ever to reduce your taxable income. Just be sure to meet with a professional tax consultant to create your game plan.
Wrapping it up
You possess unique skills, and that’s truly a gift.
While going it alone isn’t for everyone, you owe it to yourself to give it a shot. Sure, you’ll miss the two-way commute (not really) and the banter with your cube-mates (most likely), but you can always plan for great conversation and memorable road trips because as a freelancer, you’re now firmly in the driver’s seat.
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