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Myths - Need to be Self-Employed to Make Money

Some prosperity gurus suggest that no one can get ahead by working for a corporation and people need to become self-employed to be prosperous. They point to many examples of self-employed people who have made millions including Bill Gates when he founded Microsoft.

Yet, many other people have made millions working for well established companies, including Jack Welch the former CEO at GE. This assumption that self-employed employees make more may not even be true. In a 2004 U.S. government survey, the mean income for households with self-employed individuals averaged $46,184 compared to $35,535 for private industry workers. This comparison would show a smaller disparity if it included the value of extra benefits that corporations provide including health care, retirement plans, life insurance and disability insurance that self-employed individuals need to buy on their own but are included in benefit packages for corporations.

There is a reason why self-employed individuals tend to make more. Two main difference in being self-employed and working for a corporation is risk and ambition. To be self-employed, one needs to have an ambition as a trait that can be easily forgotten when working for a corporation. When someone is out on their own, they need to do whatever it takes from marketing, to doing the work and to making sure the client is satisfied. If they do not, then he will have a hard time getting clients and making ends meet. Many who work for a corporation fall into the 9 to 5 trap. They do what is needed but lose their ambition to go the extra mile to distinguish themselves. They may keep their jobs without ambition, yet it is hard to get ahead and get the pay increase. One becomes stagnate without ambition. This is where self-employed have a leg up on the pay scale because they are reward for being ambitious and if not, then the consequences are felt even more dramatically (e.g., having no clients and income). So the ones that find their ambition, they will receive the extra rewards. Yet, the same rewards can be found in corporations, if employees do not lose their ambition. Many would blame the corporation for killing their ambition. Yet, corporations would love to have people with ambition but may not have a culture the shows how important it is. So who is to blame? Maybe both, yet if you are working for a corporation, you are responsible for your attitude. Are you going to soar with ambition or fall into the trap of being comfortable and blame the company for not giving you a raise or promotion? Or is a corporation to blame for saying they want it but not encouraging it as much as they should?

The other key to consider is the risk of being self-employed. Many believe that 80% of small businesses fail in the first 5 years. There are many statistics showing that the actual failure rate is a lot smaller. It does not matter, there are more risks with small businesses. Any volatility in the economy is felt when self-employed. When there is a downturn in the economy, a corporation may lay off some employees. However, for those who are really good employees, they are usually the last to get laid off. In addition, the base salary is more stable and only their bonus may be affected. When self-employed, there is little insulation from a lose of income and clients. Thus, for taking this risk, self-employed individuals do receive some extra rewards (higher pay) during good times.

Can someone make more being self-employed? Maybe, however it is not a guarantee. Yet, if you want to get ahead, you can do it either as a self-employed individual or in a corporation, just remember not to fall into the 9 to 5 trap.

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