Money Track 1: Employment
68Making Money - The Employment Track
In this hub and for my next 4 hubs, I am going to talk about the five tracks to generate income. I do not usually talk about money but I have been doing research on this topic lately and I find it interesting to compare the different tracks to 'strike it rich'... not really. Strike it rich is a very hyped up term. I would just say, at least earn a comfortable amount of income every month. Let's start with the first track...employment or self-employment.
Let's define employment and self-employment. To be employed is to work for someone else and to be self-employed is also to work for 'someone else' but that someone else happens to be yourself. Sounds funny eh? Allow me to explain. When you are employed or self-employed, the only equity you have is your time and your energy (otherwise known as sweat equity). Basically, when you are an employee/self-employed, you are exchanging your time for money. If you are an employee, you work 40 hours, 60 hours or 80 hours a week and you get paid by the hour plus tips (if you are waiting tables) or if you are a permanent staff, you get paid a fixed amount of salary every two week and a bonus at the end of the year. When you are self-employed, you also get paid by the hour (consultants, lawyers, etc.) or by the number of 'projects' you have completed. Some good examples of the second category would be self-employed doctors who get paid when they treat a patient or commission earned by salesmen, real estate agents and insurance agents when they make a sale. (I know most of you would classify salesperson as employees - wrong, they are self-employed because their pay is performance based. No insurance policies sold, no money! Zilch! Nada! AND I also know that most of you, family person, those who work in the office and those who hold management/secretarial positions, etc, HATE salesperson...Don't do that! They are the main reason you get to keep your job. Imagine an insurance firm with a team of SOA qualified actuaries...but...no salesperson! So, where is the money to pay YOU, the CEO, the SOA actuary, the secretary, etc. going to come from? Tomorrow, when you get back to your office, give your colleagues from the sales department a kiss, a big hug or whatever it is to say thank you. Treat them with respect)
Alright, back to the main topic. Now you see why employment and self-employment is more or less the same. Basically, you are trading off your time and sweat equity for money. Once you stop working for whatever reasons, the source of income is gone. Is it all that gloomy? NO! In fact, employment comes with a lot of benefits. I do not mean to offend Rich Dad fans here but there is NOTHING WRONG with being an employee. Don't feel bad because you are not in the B and I quadrant. Make that transition slowly. In fact, being employed has a lot of advantages. I will start off with the advantages of being an employee. Firstly, you have a steady stream of income. You know that you are going to see that golden paycheck every two week. There are less taxation issues to worry about because your boss is going to automatically withhold a percentage of your gross pay. All you need to do is file tax returns and calculate your deductions. Then, you get a lot of benefits from the company, like insurance benefits, bonuses and compensation plans. Last but not least, you have a network of friends to work and to hang out with. If you work in Starbucks, supermarkets or in any customer service industry, you will know what I mean. Usually, the people you meet are genuine friends, not some back stabbers because office politics are not so rampant in those kind of environment.
Now, I will talk about the benefits of self-employment (I am including salesperson here). Firstly, you have freedom. You get to set your own time and your own pace. Next, you may actually end up earning more than your managers or the office secretaries because it is all performance based. If you are good, you earn more!! The other day, M and J show featured a real estate agent who made $135 million doing real estate transactions. No kidding! A top insurance salesperson could potentially earn more than an actuary. There are always problems to solve and obstacles to handle, which makes self-employment very challenging.
Alright, to be fair, I am going to talk about the 'other side of the equation'. What are the disadvantages of being an employee/self-employed? The main drawback is the lack of time. You only have 24 hours a day. Therefore, there is always a limit on the amount of money you can make. Second, you lose quality time with your family. I can bet that if you are employed, you will spend 8 to 9 hours a day in the office. Commuting and lunch/dinner breaks will take you an additional 2 hours. Then, when you get back from work, you will sleep like a log for another 8 hours. Doing some other stuff (taking a shower, reading the papers, etc) will probably take another 3 hours. So, how much time do you have with your family? 2 hours. And on weekends, you might get called back to the office. And the biggest disadvantage of being an employee is the lack of motivation. Basically, you do the same stuff day in day out. You get bored and sick of your job after a while. And it is also very difficult to get a raise unless the company is afraid to lose you. Now, with Uncle Sam, the higher you earn, the more you are taxed. And as I have mentioned earlier, once you stop working, there is no money coming in.
And if you think that this is bad and you want to jump straight to Track 2, 3, 4 and 5 (in my next few hubs)...DON'T! You need money for rainy days and most of the stuff on Track 2, 3, 4 and 5 assumes that you have got some mullah stacked up in your piggy bank! Don't get caught up with all the financial hype which promises all gold and glory with nothing down and quit your day job now (That is why most people got scammed in the first place). You will need money and more often than not, the best way to earn some steady income is to get a freaking boring job (2 or 3 if you are really desperate), join a sales team or offer your services if you absolutely could not find a job. Even a quick money (this wont get you rich but you can earn a quick buck every now and then) program like Payday needs an initial payment of $39.95.
So, I have said enough. That's it..the pros and cons of being employed!!
Related hub: Investing
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