I don't think 99% of us like thinking about personal finances. That means bills and taxes, both of which can be punishing. Those of us living in Washington know the pain too well, as our state is one of the top ten when it comes to household expenses.

There's no question that we've faced a lot of financial challenges in the past 20 years. The recessions of 2008 and COVID-19, in particular, pushed many people out of their regular day jobs. While some took that as an opportunity for a sabbatical, many turned to self-employment for financial support.

A recent study offers some insight into the pitfalls of self-employment. Overall, the majority of self-employed people feel "trapped": but how did they get there?

My experience with self-employment

I was working in finance when the Great Recession started pummeling the market. As a newer employee, I was laid off, and work was hard to find. As I was working some part-time jobs and struggling with health issues, I started writing content (primarily about video games) on the internet. Over a few months, the availability of long-term employment dried up, but my writing career was taking off.

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I eventually turned to freelance writing as a full-time career. The first few years were the hardest: I was paid per piece on some websites, or per view on an abusive pay scale by content mills. Often, I couldn't pay rent and needed to rely on the help of family and friends to get through the month - even when working 12-16 hours a day.

Persistence paid off though, and I eventually found a steady client that hired me on as a news editor and, eventually, became editor-in-chief while still working as an independent contractor. Ultimately, I spent 14 years working self-employed, full-time.

Self employment tax set aside, stressed woman
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The ups and downs of working for yourself

I have the right personality for self-employment. I'm very self-driven and capable of managing and sticking to a schedule. I hate when I'm not being productive, so working hard without someone as my boss wasn't an issue. In fact, I thrived without having strict oversight and without worrying my income was tied to an employer's opinion of me.

Working for myself, at home, also meant that I had the flexibility to deal with health and family issues. As my health frequently led to attendance warnings at jobs before I started freelancing, this was an enormous benefit. It also helped me support my parents when my father was diagnosed with a dangerous auto-immune disorder.

The real challenge for me was the taxes. Initially, the taxes were minor and caused no issue. Changes to the self-employment tax laws, however, eventually meant that I could no longer claim exemptions, and a few years later, I also couldn't claim home office expenses. I became stuck: I couldn't afford to pay my taxes because I was living from paycheck to paycheck and didn't make enough to set aside 15% for tax payments. This meant that instead, I was accumulating a debt to the IRS while struggling to make ends meet.

Being "trapped" is a common feeling for the self-employed

My experience with self-employment isn't unusual. Many entrepreneurs and freelancers find themselves feeling trapped - not just by the IRS, but by the work in general. Latenode recently conducted a survey to look at the struggles facing the self-employed, and found that nationally, 45% of small business owners feel "trapped in their businesses." In Washington State, that number rises to 57%.

 

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The study finds that barriers to exiting include emotional attachment and financial dependence, as well as economic barriers and a lack of suitable buyers for those attempting to sell their business. Financial dependence was the primary chain around my ankle: unless I could find something that paid as well and granted me job stability, I had to keep on freelancing.

Latenode also reflected on the importance of work-life balance, saying that 72% of business owners found it very important. This is something I struggled with the entire time I was self-employed, and many others find it the same: often you find yourself spending too much time with family and not enough time productively working or, in my case, you do the opposite. When work isn't structured and "always available," you can forget to separate it from your life outside of work.

Should you choose self-employment?

Everyone's situation is ultimately different. As someone who had over a decade of experience with self-employment, my advice is to ask yourself these questions:

  1. Are you driven enough to work without someone else telling you to?
  2. Can you separate work time from personal time without a fixed schedule?
  3. If you will work from home, can those you share your home with respect your workspace and work time?
  4. Will you make enough income each month to pay business expenses, including self-employment tax?
  5. Will you be able to afford professional services (printing, accounting, etc)?

Whatever you choose, I wish you luck on your journey. Success is possible, but self-employment isn't for everyone.

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