Oftentimes we talk about being our own boss and dream of being a self-employed entrepreneur or a lifestyle business owner.
We talk about making lots of money, about quitting our boring day jobs, and early retirement?
We aspire about starting a lifestyle business and later perhaps someday even turning it into a billion-dollar empire!
Not all career ladders go up, some are just flat 😉
Employee vs. Entrepreneur
But, have you ever wondered what would be a better course of action for you? Being a salaried employee or being a small business owner? Perhaps, the best answer depends on our particular situations and where we are in our life.
Let’s say, you are a small business owner. Whether you have an online store or you are hustling as a Solopreneur.
Small Business Owner
Say you work as a contractor (or are self-employed, for example as an uber driver).
Say, you make $40/hour and work 40 hours/week. That’s ~ $84,000 USD per year. Sounds like a lot of money, right?
But, do you realize:
You’ll be taxed 22% off that money by the Federal government
You’ll be taxed 5% off the remaining by your State government
5% will be gone into your health insurance
5% extra will be taken to match your share of Social Security and Medicare Taxes
10% of the money will go on gas, car insurance & maintenance, & other business expenses
10% will be spent on comfort good or eating out because of stress
20% of that money will be gone in unexpected emergencies and/or later years health care costs as you get older
25% will be gone in rent and utilities if you choose to live *modestly*
The Long Term Outcome
This leaves you with 0% money for investments, education (self-improvement), travel, and other life events (weddings, etc.) or life emergencies.
Now, knowing this and giving this some more thoughts, would you still do it? Would you still drive for Uber or start a small business?
If so, what would you change and how would you split your expenses and which investments and savings decisions you would make?
You don’t have to be a slave or a drone
Now let’s say you are a 9-to-5 slave to your stable biweekly paycheck. Let’s see what happens in this case.
A Salaried Drone
Say, you make $84,000 a year. Say, you get 2 weeks of paid vacation, paid okay healthcare coverage, and a 3% match on 401K contribution.
Let’s say you live in the city as the above example and your transportation, utilities and rent expenses are the same.
This means, you are spending the same money as in the above situation BUT, you are getting:
- Ten days of paid vacations + 10 paid national holidays each year (Read: this is your opportunity for having a paid vacation)
- You are saving 5% of your income on healthcare because it’s provided by your employer
- You are getting 3% extra income-bonus through your employer’s 401k match, and also you are forced into saving at least 6% – 10% of your income each paycheck
- You are not contributing double taxes in Social Security and Medicare taxes because your employer is paying it for you
- Because of life and income stability, you are less worried and therefore you can afford to make a plan about bringing lunch from home, not eating out, and even putting some money towards an emergency savings account.
What would you do? Which path will you take? Would you rather be an unhappy 9-to-5er or will you try to strike your own destiny?
Are you an employee or an entrepreneur? Why/why-not?