The good life?
This past weekend I tweeted:
I am fairly confident that one day I will tell people ‘I used to be an accountant’
A fellow accountant, Lance from Money Life & More responded to this tweet and led me to reflect on what my goal really is with my career, income, and my dang entrepreneurship itch that I’m afraid will never go away. I’ve already written about the benefits of being an employee as well as some of the perks of being a full-time employee. The reality is that there is a huge incentive to get a career/job and stick with it until retirement. With that being said, I know for a fact there are millions upon millions who will end up or already have ended up reaching retirement wishing they had given something else a try.
I’ve researched different ways to make income and create wealth quite a bit. Don’t ask me why, but I started to read Donald Trump’s books in middle school. While most of his books are pretty much high-level and broad advice, I have also looked into and seen firsthand how people have made income in various other ways. This has ranged from online poker (there are multiple people from my high school who have in excess of $1 million in lifetime winnings) to writing to small business ownership. Overall I think that income generation comes in a few different stages, which I which I will go through now and in the end I will talk about what my overall goal is for how I generate income.
Employee
Whether it’s working at Pizza Hut (which I still think was the best job I ever had…in a non-monetary sense) or working as a financial analyst at a huge corporation, an employee is someone who essentially works for one company and trades their time for money. Again, there are a ton of benefits to being an employee versus some other income-generating options, but the biggest drawback is that you are trading your time for money and it’s highly unlikely that arrangement will change as long as you plan on working for someone else.
This is where most people stop. There are countless would-be entrepreneurs who simply are not in the position to take the risk of entrepreneurship or simply are willing to keep the security of a job and enjoy their life outside of work as much as possible.
Self-Employed
Self-employed individuals are people who have a special skill and essentially have one-man shops. There are many benefits to this sort of income setup. You get to set your own hours, take on as much or as little work as you desire, and you answer to no one but your clients (which are essentially ones you choose to work with versus being forced to work with a client as an employee of a larger company). While self-employed individuals have the ability to essentially choose how much their time is worth, they also have potential to make more money as they become more in-demand for referrals. I wrote about ways to find customers for your service business and stressed that there will always be clients needing certain work done. Lots of frustrated and disgruntled employees see self-employment as the best chance they have at getting away from working for someone else. But most also do not realize they should have a strong sense of organizational leadership to make it work.
Business Owner
Business ownership is a lifestyle that is idolized by many employees who would love to stop “working for the man.” Not only are you the boss as a business owner, but you have employees who you can utilize and leverage to maximize the value of your company. Depending on the size of the business (and the financials), business owners could realistically spend very little time on tasks they do not want to do, such as accounting or marketing.
I would like to further split business owners. There are many small business owners who end up working eighty hours a week and constantly have something that needs their attention. They might make a lot of money or they might make a little money, but they’re the boss. They set the agenda for the company and success and failure ultimately falls on them.
The second group of business owners are pretty much completely detached from the company. Everything from sales to support to advertising is automated; the owner has built a system that does not require him to be part of the process. Easily the best book about this sort of income generating setup is The 4 Hour Workweek by Timothy Ferriss. In fact, the entire book is meant to explain exactly how to go about setting up your “muse” and trying to convince you that it’s a myth that a business owner has to be a vital part of the business model.
My Take
Personally I really look at it as a progression system of sorts. Most everyone will start out their working lives as an employee. A large majority of people will stay there and will never move on to self-employment or business ownership, and that’s okay. A smaller percentage of people will try to work self-employment on top of their regular job, and even less will eventually quit their job to work this business full-time. There is a decent number of people who will either be self-employment or own a business most of their life.
It’s natural to progress from an employee to self-employed or business owner. What I personally care most about is the nature of how income is created in terms of time committed. The reason I think that in forty years I will not still be an accountant is because I’m so interested in the various forms of income generation and have been intrigued with forms other than employment. I personally know quite a few people who are either self-employed or own a business and are making more money working less hours than they would as an employee.
Right now I think I am in the right place, and that is working as an accountant for a large corporation. I have a career track, I’m gaining valuable skills, and the salary and benefits are exactly what I need. Long-term, though, I still think I will give self-employment or business ownership a shot, with a long-long-term goal of creating a muse (Timothy Ferriss’ term) where I own a business (or multiple businesses) where I have outsourced most of the work. What that will look like I’m not 100% sure at this point, but I certainly have been inspired by various people I have met – primarily through blogging – who are showing that it is much easier to design a lifestyle you want if you are not an employee.
Check out DC’s new book Hustle Away Debt to learn everything you wanted to know about making money through side hustles!
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Now I want to hear from all of you: what are your thoughts on the various forms of income generation? Are you an employee who desires to own a business or be self-employed? Are you happy with being an employee? Is business ownership even worth the risk?
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I would say that you are spot on with your career evolution here…at least the way I see things. At the moment, I’m still and employee. Holly recently became self-employed. I also plan on making the leap at some point in the future. Our ultimate goal is to become business owners. Whether that is through our website, rentals, or some other means is still to be determined. However, I think we will get there eventually.
GregatClubThrifty I definitely have enjoyed hearing about Holly’s transition, and it seems like it’s working out well for your family. You guys seem to be on the right track to business ownership.
I am an employee who is planning on generating enough side income ventures to eventually not have to slave away at the 9 to 5. I’m ages away from that goal, but you have to start somewhere right?
I’m not sure if you saw it or not, but I have started another site which is dedicated to my efforts to generate a liveable income from online activities (www.makingmoneyonline24x7.net).
MonsterPiggyBank Most people don’t even start working towards it, just think about it or talk about how it would be too hard or impossible for them to ever get there. It’s obviously impossible if you never start!
I have checked out your site but I appreciate the reminder as I forgot to bookmark it! Might email you about how difficult it has been for you to run the two sites at the same time. I have considered it but this site really takes up 99% of my time.
I think you hit the nail on the head DC! I think many do want to run their own business and stop working for the man, but it is hard work…to put it lightly. Many like the “security” of the paycheck and I understand it. The thing is though, that many do not realize that in today’s business culture that security can really be a false one as the company will do what is in their best interest. If you can make it work, then running your own business is worth it…but you need to have a solid plan in place and know what you want.
FrugalRules I always appreciate your perspective on this topic, John, because you’ve actually made the transition from employee to business owner. I agree 100% that the security of your job can be an illusion, especially when businesses are pinched for profits (just look at the margins at health insurance companies…their operating income is literally capped by law!). I think you HAVE to have a plan, though, and not just blindly pursue self-employment or business ownership. It seems like you really crunched the numbers and had a plan laid out before making the transition, and I think that’s inspiring to others who want to make the move to actually sit down and figure out what they plan on doing if they are no longer an employee.
Great post DC. I definitely want to be self employed. I am in the planning process right now because I definitely want to be as prepared as I can be and I don’t want to regret it just after one month.
SenseofCents You seem to be on the right track so far. It has to be an excruciating decision to actually take the plunge and quit your 9-5 to work for yourself full-time.
Here’s my take: I’ve seen too many people jump into entrepreneurship because they wanted to practice a skill alone than in a company. Sadly, when they become an entrepreneur, they realize that they aren’t practicing that skill as much as they’re practicing running a business. Once someone is willing to actually run a business alone, then I think that being an entrepreneur is a wonderful opportunity.
AverageJoeMoney Excellent point! That’s a huge advantage of employment – you can practice a very specific skill, be it accounting, web design, etc. without having to worry about all the other aspects of the business. Definitely something to think about before taking the plunge.
I love being self employed, but there are still some huge downsides. The biggest is the $1,100 a month we pay for health insurance.
OneSmartDollar I hope you are able to pay less starting in 2014 through the exchanges.
Well I just wrote an article about being a freelancer. lol! But I would absolutely consider going back to full time if the right opportunity came along!
Beachbudget Pros and cons to both, I suppose.
Awesome post, David. I completely agree with everything you said. As much as I’d love to be own my own business someday I realize that working for a large corporation is where I need to be right now. I’m learning valuable skills and making enough money to hopefully give us more freedom in the future. Hopefully by the time I’m 30 or 40 I have multiple, constant, income streams and I’m doing something I love.
CommonCentsWealth Thanks for the kind words, Jake.
I agree that as a business owner the buck stops with you and you could potentially end up working 80 hours a week. But as you said there are businesses that a person can startbuy that do run on their own with very little intervention from the owner. In our city I have watched a number of new franchises open and their system is such that one person may own several locations of said franchise but by hiring the right management and employees and following the systems setup by the franchise itself, their locations pretty much run on auto-pilot which frees up a lot of their time. To me that would be the ideal way to have things work :-)
TacklingOurDebt Great point about franchises. Some people loathe franchises and think it’s the worst way to go when it comes to business ownership. I personally wouldn’t mind owning an established franchise, though, and it’s definitely something I would consider starting down the road.
My preference goes to self employed, as much as you automate your business, there is a maintenance involved, even worse if the biz is physical with shops, stocks, and the like. If you have a few income sources as a self employed, you are golden.
I am currently an employee with the desire to be self employed and have a business of my own someday. The freedom it would provide would be amazing. However, it will come with risks. I will get there someday.
freemoneyminute Sounds like we have a similar plan ;)
I have been an employee and self-employed. There are perks to both. I do currently enjoy being employed because there is less stress, but it allows me to pursue other income generation ideas outside of work to test the waters. There are so many options.
DebtRoundUp That’s where I’m at as well. Working a 9-5, having a career, and learning new skills through that is definitely where I belong for now. If a side income idea blows up, who knows? Maybe I will be self-employed or a business owner, but it would take a lot to get me to leave full-time employment.
I’m half in between, but did the whole small business thing, which is ending sometime later in the year. Technically, I still own it, but have good people in place at this point to run it, so I guess I’m close to the business model in the book. However, for as good as any business runs, the wheels do tend to fall off at random intervals, and you are where the buck stops. You have to continually motivate and compensate those who run your business, often when it maybe isn’t something you want to do. I’d say go for it, but expect lots of work in the beginning. Anyone who tells you it happens quick is lying.
Eyesonthedollar Good words, Kim! I know you’ve written about your small business ownership experience quite a bit in the past, and I’d be really interested in hearing more about it in future posts.
I definitely have the entrepreneurial itch, but I like being able to take sick days without the sky falling! I also value my time too highly now, so anything that requires too much dedicated time from me with an unknown payoff sounds like too much work to my tired self… *sigh* One day I will come up with an (some!) ideas that are viable enough to justify.
I’m glad I could inspire a post! I would definitely like to move up that ladder over time, the question is just when and doing what!
I’m home with the kiddo right now, but I would love to have a business that my husband and I could do together. I know that he would really love to be self-employed and it is something I am seriously wanting to do.
I am a small business owner and I overall love it, but there are a different set headaches from my days as an employee. Of course, no job is hassle-free! What I love is how carefully you’re thinking through everything, knowing that you’d ultimately like to take the leap to self-employment, but also recognizing being an employee is right for you at this time. I see a lot of people just leap to self-employment and fall, not because they didn’t have a financial cushion, but because they weren’t full prepared to wear all the hats a business owner is forced to wear. They had a great skill but hadn’t thought how to market it effectively. With all the things you do on the side, when it time to make the leap, you’ll be well positioned to succeed.
I am currently in the same position as you career wise… One day I would like to make the move to self-employed, but the benefits of where I am just now are FAR too good…
I used to be an accountant! Really! Went from being a corporate finance executive to business owner; sold the business and now work from home blogging. Yes, it can be done!