Is self-employment for you?

“By working faithfully eight hours a day, you may eventually get to be a boss and work twelve hours a day”

– ROBERT FROST, American poet and winner of four Pulitzer Prizes

Robert Frost said well, and my wife & I can attest to it. Self-employment is a lifestyle and it is not for everyone, for sure. It requires a lot of hard work. It does not guarantee a steady paycheck. You are responsible for your own retirement. It blends personal life and professional life together. It has drawbacks such as paying for your own health insurance. It requires paying full FICA taxes and making quarterly tax payments as well.

On the other hand, it has rewards, plenty of them. You are the Boss, the buck stops with you. You set your own income limit. It enables you to be at your children’s school activities, sporting events whenever you wish not whenever your boss let’s you.


- No steady paycheck: It is all you!

- No company provided retirement account: You are responsible for your own retirement. You would have to establish a retirement account such as IRA, SEP IRA, etc.

- No company provided health insurance coverage: You are responsible for your own health insurance coverage. Depending on your situation, this might be the biggest expense of all as a self-employed.

- Payment of full FICA taxes: FICA taxes refer to Social Security and Medicare taxes. Employer pays 50% of these taxes. Self-employees pay full FICA taxes.

- Long hours and associated stress: Refer to the above quote by Robert Frost!

- No clear line of work and personal life: This is especially true if you run a home-based business.

- Feeling of isolation and loneliness: This is more of a personality issue. Some people require interaction, acceptance while other don’t.

- Risk of losing personal wealth: If you make a mistake or sued, it is your mistake and you are responsible for its economic consequences.


- You are the Boss: There is no one to report to, except your clients, of course.

- Flexible working hours: There is no rigidness of 9 to 5. You can set up your own hours but please refer to the quote above, you would most likely put more hours than 9 to 5 has.

- Unlimited earning potential: Whatever you make is yours to keep. You don’t get a commission it is all yours.

- Health Insurance Premiums are deductible: You may deduct your premiums.

- Certain business expenses are actually deductible: You may deduct certain business expenses such as, rent, phone, transportation, etc.

- Higher contribution limits compare to 401(k): Simplified Employee Pension (SEP) IRAs have higher contribution limits then 401(k) plans. For example, it is up-to 25% of the employee’s compensation or $50,000 for SEP-IRA in 2012.

No getting stuck in the rush hour for home based business: It is priceless!

Did I miss any of the advantages or disadvantages? Please feel free to comment on it.