For millions of people in the younger generations, stagnating wages and the rise of the internet have led to a new alternative to traditional careers: self-employment. Uber and Lyft are spreading throughout American and Canadian cities as an alternative to public transportation and taxi services, and one big way they keep costs down is by hiring drivers as contractors rather than as full-time employees. It means the drivers can set their own hours and quit whenever they feel like it, but it also means income taxes normally covered by the payroll are now the drivers’ responsibility.
Other people are creating websites and funding themselves through ad revenue, or they’re self-publishing their writings, creating artwork on commission, or selling music online. Still others are appealing to crowdfunding sites and other investment avenues to create movies, write books, bring inventions to market, and other activities that demand some initial investment.
However, self-employment comes with a few pitfalls to match its benefits. Chief among them are taxes: while traditional employees can expect a tax refund when they apply their deductions, self-employed and contract workers will owe money instead. This means having to maintain a budget to make sure there’s enough money left over to cover taxes, and it means having to learn expense management in order to stick with a budget and keep track of deductible expenses.
Expense management is important to businesses that want to keep their employees honest and keep costs under control, and it’s important to self-employed individuals and small business owners for just the same reasons. And if you don’t think it’s possible to cheat yourself, just think back to the last time you cheated on a diet or bought something on a whim. Self-discipline and expense management are important skills no matter what your employment situation is, but it’s particularly important when you don’t have an employer handling any of the steps for you.