When I was stuck in a job that I was emotionally over, and I read the book 4 Hour Work Week by Tim Ferris. The book details his decision to give up the confines of full-time employment to discover the adventurous life of a self-created freelance career and in exotic locations all over the world. To determine my own hours, to be free to live wherever I wanted and to shape a career around my passions all seemed like bliss to me.
Today, that is not just a fancy dream of a wealthy millionaire author and speaker but the norm for an increasing number of Americans as we evolve towards a more entrepreneurial society and freelance workplace. Some 65% of Millennials want to be entrepreneurs and own their own business. Millions of Americans have found themselves forced into freelance work since the Great Recession after being unable to recover full-time employment. For many of those like myself who have taken the freelance journey, life is rich and satisfying, but it is not paradise. But for most of us, our work falls short of the exotic lifestyle described by Tim or the one of Millennial dreams.
Before I share more, I do want to note that there is a significant difference in the experience of those who choose freelance careers as an hobby (for example, a retired person on a pension who just wants to do interesting work) and those who choose it as a revenue-generating career (like me in my 40s). I have to work because I have financial obligations and must save for the future, so a leisurely freelance life is not an option for me. This blog entry is for this latter group like me who need income.
I encourage everyone to follow their dreams, but there are 5 myths that I wish to shatter about the freelance life, and I urge you to consider 5 realities before you leave your full-time job for entrepreneurial ventures:
1. I can work when I choose. Not if you need money from clients who set the deadlines or dates. Yes, you ultimately are in control of your schedule, and you can say “yes” or “no”, but well-paying loyal clients only choose freelance workers who meet their deadlines, not the other way around. Even if I have a day that is unscheduled with a client, it generally is packed with conference calls, reports, logistics, and travel.
2. I can work where I choose. It depends, but most likely there will be significant restrictions depending on your work and career. If you are a writer, speaker or artist — sure, you can live in Portugal or Timbuktu. But if your work depends on corporate contractors or a business presence, you will have to be in certain strategic locations that give you access to population, markets or a great airport. I am finding that my clients are more and more hesitant to pay travel expenses when they have many choices of freelance workers in major cities, so my work requires me to live in cities of certain size and location. If I locate myself outside of those areas, as much as I might love the mountains or the beach, I am setting myself up for failure and limited opportunity.
3. I can work less hours. If you have a trust fund, yes you may. But if you are dependent on your work for paying bills and putting dinner on the table, you most likely will find that you work more hours as an entrepreneur and not less. One reason is that you now are responsible for the full scope of your business — on top of the actual work for clients, you are now are responsible for administration, travel, taxes and payroll, scheduling, client reports, and marketing of yourself or your business. If you’re like me, your clients will be spread across several time zones or even in foreign countries. It is not unusual for me to receive calls or emails from London at 7 am, and calls or emails from US west coast clients at 8 pm. While I might take a longer break for lunch with a friend, or to go to an appointment in the afternoon, I also am answering emails and calls late into the evening. It is not unusual for me to work 16 hours per day when I am the road (yes, those work trips that your friends think are sexy because you are in San Francisco, but you are toiling away at 1 am on your computer in your hotel room). Perhaps you swear that won’t be you — but if you need work and are responsive to your clients, that is often the reality.
4. I will have more vacation time. I have not found this to be the case at all. At my old job, I had a guaranteed 3 weeks per year and all holidays. Even then there were sometimes difficulties with getting away, the structure and guaranteed pay made vacations more possible. Now, I struggle to take more than two weeks per year, and only one trip per year that lasts a week or more. Yes, it’s true that I have some “off days” at home when I have discretion over my time, but these are few and far between if you’re serious about your business and have multiple clients. Twice this year, I have scheduled long weekend vacations only to have clients who desperately needed me during one of the two days I had scheduled for vacation. This is the way the scheduling universe works: all clients will want you on the same two days per month at the end of the quarter, and they all will ask for your time when you wanted a vacation. And, of course, when you have more time to travel as the holiday period nears, that means the money also is less for spending on that big vacation unless you carefully save during the good times.
5. I will make more money. This may be true if you work in certain fields, but it is often not the case. Over the long haul, if you’re successful, perhaps you can multiply your earnings from passive income or from business profits. In the short term, though, you’re going to pay: 7.5% of your federal FICA tax on your gross income that you’re employer paid when you were an employee (for a total of 15% of gross income); 20-30% of gross in federal, state and local taxes; state or local license fees; administrative expenses for supplies, lawyers and accountants, and fronting travel expenses. For example, I may have a successful month financially, but at any given time, almost $4,000 is awaiting reimbursement to my credit card or bank account because of travel, meal and transportation expenses. Health insurance costs me $350 for month for an individual policy, and that is with a very high deductible. Finally, it is rare to find freelance work that generates the same level of income year around, so you have to plan carefully for the slow times. It has taken me six years of freelance work to learn how to better plan my finances for the slow periods (for me, usually the late fall and holidays).
I love the entrepreneurial life, and I am grateful every day for work that is close to my heart and passion. But I’ve yet to be able to work from a remote Mediterranean island or to take a month off for a hike across the Pyrenees. I encourage you too to follow your dreams, but before you do, be sure the entrepreneurial life is the one for you and for your financial aspirations.
Todd Bouldin is a learning and development consultant for Fortune 500 companies and a coach for all of those who want to live and work more authentically and effectively.