When people start to examine the best ways to earn serious money, they sometimes come to the conclusion that the most advantageous move is to work for themselves or go into business on their own. Starting your own business, or freelancing, is the perfect way to break away from the confines of an office environment where you think you are being rewarded too little for too much work. If you believe in your skills, no matter what industry you work in, then going freelance and starting up your own business can be very exciting and extremely rewarding. Not only that but you will discover a new flexibility to take the projects you want to take and to maintain some control over the direction your business and your career is going. Since most office jobs for big companies no longer have the advantage of being a job for life, like they used to, and with the internet offering jobs from all over the world to freelancers, it is now much easier to work for yourself. Best of all, freelance rates are often almost double those of their company worker equivalent. Add to that the fact that you are the business and you own the business and it quickly becomes clear that working on your own can be extremely rewarding, financially speaking.
With all that being said, it is never quite that easy and anyone thinking about changing their career to work for themselves should take a moment to reflect on what it might be like. Clearly there are going to be downsides too. There will almost certainly be weeks, or months, particularly when you start out, when you find there is little or no work coming in at all. This can be scary. How will you cope? Will you have savings put by? Will you have the willpower to not draw too much money from the business when times are good, so that you can cover yourself when times are lean? Secondly, have you got it in you to go out there and chase contracts and customers down when business is slow? You will be depending on yourself for your income so you better know for sure that you have got the drive that freelance work requires. Thirdly, have you thought about the disadvantages you will face when it comes to mortgages and other financial products? Running your own business and working freelance may be financially rewarding but they are also seen as being less financially stable by banks and other financial institutions. It is a fact of life that the banks are always more reluctant to lend money or provide mortgages for freelance workers and small business owners because they see them as a bad risk. This is unfair, but to a bank, the calculation is simple – freelancers and small business owners will have irregular salaries and payment schedules and could suffer a drop in business at anytime. Finally, even if they do decide to offer you a mortgage or loan, it will normally be at a higher rate because of the perceived risk they see in you as an investment.
That is not to say there are no companies out there specializing in this kind of product for people who work for themselves – there are. You just need to look a bit harder to find them. Bear in mind too that there are also a huge selection of tax benefits and government incentives for people who want to start their own business. Certainly, going freelance or starting your own business is not to be taken lightly. There are risks. But it can also be the most liberating and financially rewarding decision you will ever make. Think carefully.
Alex is a financial journalist and blogger. He writes about all aspects of finance, from personal finance to starting a business and from mortgages to tax reduction
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