Pursuing financial independence has many paths, but self-employment – more often than not – is said to be one of the faster ones.
It also has some of the benefits that cubicle-dwellers yearn for, but cannot get to as easily until they’re financially independent.
So what’s it like to be self-employed, and more specifically, have a “lifestyle” business in the real world? Or to put it another way, what will your life be like after you achieve FI and have a lifestyle business to keep yourself occupied?
Your Schedule Is Flexible
Doctor’s appointment in the middle of the day? No problem! You can do errands when you want, and schedule your day around other stuff you need to get done. No more fighting the hordes at Costco on a weekend either. I generalize, but you get the point.
Work On What You’re Passionate About
Most lifestyle businesses start this way. You’re naturally good at what you like doing, and if it has legs, you may end up making a good chunk of change in your business. No dead-end jobs that you stopped loving a while back.
No Dreading Monday Morning
I remember the last time I went up to the Bay area to meet a bunch of friends for a mini-reunion. It was a Saturday night and over beer and pizza the topic of work invariably came up. To this day, I remember being struck by the observation that they were suffering from Monday morning blues on a Saturday night! Maybe I’ve gotten a little too laid back living in Southern California, but that’s not how I see myself getting through the next decade.
Being self-employed gives you the flexibility to do what you enjoy doing and live your life the way you want now, instead of later. I can’t remember the last time I dreaded going back to work. Yes, there are highs and lows like with everything else in life, but never Monday morning blues for decades on end.
More Family Time
This is probably one of the biggest benefits of a lifestyle business, during the accumulation phase, as that’s likely also the time you have a growing family. It’s also the easiest one to screw up as there’s always ‘more work’ that needs to be done. If you are able to successfully balance your business and personal lives, you will be living in harmony with yourself.
Higher Earning Potential
The harder you work, the more you get paid. Performance reviews, company politics, favoritism or a reduced bonus because the company didn’t have a great quarter don’t even feature on the horizon. You are your own boss (well, almost) and your efforts and skill will essentially decide how much you make and how much quicker you get to your financial independence magic number.
If it is a lifestyle business and your spouse is also an owner-employee, you have the potential to sock away $54,000 each in 2017 ($60,000, if 50 yrs or older) in your Solo 401(K). Need I say more?
Side hustle, baby!
You have additional time to cultivate and explore passive income streams. This has far-reaching implications for your post-FI world. Trust me, running a business is hard work and requires a lot of missteps before you succeed. You have to wear multiple hats and navigate a world of (sometimes) too much information, not all of it accurate or useful. Suffice it to say, if you’ve managed to have a few side hustles while working towards your financial independence goals, you’ll have a head start on those that are just starting out.
Better Prepared To Pick The Right Health Insurance
Once you give up working for ‘the man’, and before you’re eligible for Medicare, you’re going to have to figure out the health insurance options for you and your family. I think we all know that the FI/RE obsessed crowd that we are, most of us will crunch our numbers and account for health care expenses – and hopefully include a buffer – in our calculations.
We’re definitely a minority.
Even then, calculating future premium costs while you have decent employer-subsidized health insurance and experiencing the reality of a Bronze HMO plan that you purchased from the health exchange because that’s all you could afford are two very different things. This is not to say that those plans are bad or that employers don’t offer the same plans to their employees, but only that being self-employed you’ve already experienced what it’s like when it comes to health insurance. Let’s leave politics and religion out of it for all the usual and obvious reasons.
Self-Employment and Financial Independence
I have been self-employed for more than a decade, and I’ll be the first to admit: it isn’t perfect. There are a few downsides, but none that can’t be overcome. If done right, self-employment has the biggest potential to give you some of the benefits that you’re looking for from a financially independent lifestyle.
It will likely also help you get there faster.