For the past week and a half I’ve been in the middle of the desert, far removed from internet access, mobile phone service, electricity, running water or sewage. (Sorry if I haven’t responded to your comments yet!)
Regular readers to this blog might notice I’ve taken a huge number of trips this year: I spent one month in New York this past spring, two weeks in the Caribbean this summer, and now I’m camping for 12 days.
I balanced these “big trips” with lots of “mini-vacations” — I visited New Orleans three times this year (January, March and June), where I picked up a few lessons about time management, and I’ll be in New Orleans again in September just before I fly to Chicago for the financial bloggers conference.
I travel frequently thanks to the fact that I work for myself: I never ask for time off. My time belongs to me, and no one rubber-stamps how I spend it.
Unfortunately, the fact that my time off is – allegedly – “unpaid” startles too many people.
The concept of “paid time off” – if you’ll allow me to be blunt – is one of the greatest deceptions of modern life. I’ve heard countless friends say: “Can you imagine? I get paid while I’m on vacation!”
Well … no, you don’t. (Sorry to break the news!) You get paid a flat rate for committing 49 to 50 weeks per year to working for your boss. You boss “budgets” that flat rate into a series of payments that flow to your bank account at regular intervals.
You’re not “getting paid to go on vacation.” You’re getting paid to work. Period. Your boss schedules these payments in regular installments. Paid vacation is an illusion – a clever ‘marketing’ ploy that makes employment seem more desirable.
Doesn’t “paid vacation” sound more appealing than “getting paid in installments for work I’ve already done”?
RETIREMENT IS ALSO AN ILLUSION …
The same, by the way, is true for “retirement benefits.” Some people believe that a drawback of being self-employed is that you miss out on retirement benefits, such as a matching 401(k).
But pause and think about that for a second: fundamentally, a matching 401(k) is simply a “bonus” that you receive for participating in the retirement program.
Too many people think: “I get paid $50,000 a year plus a 401(k) employer match of up to 3 percent, plus 3 weeks paid vacation.” This is the wrong way to view your compensation. It’s too vague about what your time is worth.
Try conceptualizing your pay this way: “I earn up to $51,500 a year in exchange for working 49 weeks per year.”
As a self-employed person, you’re not missing any benefits – you’re simply responsible for earning enough money to match, or beat, what you earn at a conventional job.
If you earn $50,000 at a conventional job — Can you earn $51,500 working 49 weeks each year for yourself?
If you earn $40,000 at a conventional job – Can you earn $41,200 working 49 weeks each year for yourself?
Earning $60,000 at your job? You need $61,800 working for yourself. Earning $30,000 at your job? Earn $30,900 working for yourself. You get the idea.
WHAT I SAVE ON GAS, I SPEND ON HEALTH CARE
To be fair, there are several disadvantages to being self-employed: no secure paycheck, no discounted health insurance, and no vibrant office full of co-workers telling jokes and trading gossip (which is what I miss the most).
The main drawback is the risk. Some months you’ll get paid well, other months you’ll make next-to-nil. Live below your means and you’ll be fine.
But health care is also a downer.
You can value your company health insurance as part of your “salary.” If your company pays your $250 health premium each month, then your goal as a self-employed person is to earn an additional $3,000 annually to compensate for this.
Unfortunately, buying your own health insurance is much more expensive than company group coverage – that’s just the nature of health care in America. There are two ways to deal with this:
#1: Raise your self-employment goal of bumping your pay from an extra $3,000 yearly to an extra $4,000 to $5,000 yearly.
#2: Figure out how much you save by not commuting to work or buying fancy office clothes (I blog in my pajamas). Add that to your health bills.
Let’s look at a conservative scenario that imagines you live close to your office and you drive a fuel-efficient car.
If you drive a meager 5 miles to your office each day – 10 miles roundtrip – this puts 2,450 miles on your car each year (10 miles/day x 5 days/week x 49 weeks/year).
At a low estimate of 25 cents per mile (this is less than half of the IRS cost-per-mile estimate of a whopping 55.5 cents per mile, including depreciation, but we’ll assume you drive a super fuel-efficient car that has already depreciated), this short commute costs you $612 a year.
Add another $600 for buying work-appropriate clothes, and you’re paying $1,200 a year – an extra $100 a month – for the honor of being someone else’s employee. Save this money by working for yourself and apply it towards your inflated health care costs.
The Bottom Line: Your job ‘benefits’ are worth less than you might think. The biggest benefit to your job is reducing the risk of not earning enough; the biggest drawback is eliminating the possibility of earning — or traveling — more.
Please note: I’m out of town, so sorry if I don’t approve or reply to your comment until I get back.