Is Self-Employment Risky?

It was just under five years ago that I made the decision to step away from a secure full-time job to become self-employed. It was a very risky decision, but there were several reasons why I made that choice.

First, my work had turned into something I didn’t enjoy nearly as much. During the first few years of my job, I was into software design and development. Over time, my job turned into server administration, technical support, some code maintenance, and traveling to conferences and meetings. I deeply enjoyed the work I did at first. I didn’t really enjoy what I did during the later phases of my job. I still enjoyed the work environment and co-workers, but I didn’t like what I was working on.

Second, I felt distant from my family. I missed my son’s first steps because I was on a work trip. I had to blow off a visit from some very close friends I hadn’t seen in years because of a server crash. My son asked me when I was coming home in a very sad voice during one of my trips. I felt distant from them, and it was a feeling I never wanted to have in terms of my family.

Third, I had some self-employment opportunities already built. The Simple Dollar had been built in my spare time from late 2006 to early 2008 and was earning a small but steady income. I felt it had a lot of opportunity to grow.

So, I stepped away from that secure full-time job to become a full-time parent, husband, writer, and blogger.

What’s changed?

I usually work during the “gaps.” By that, I mean I’m able to be at the door when my kids get home from school. I’m able to take care of them when they’re sick. I attend all of their events and coach their soccer teams. I get to choose when I work, and I work in the “gaps” – early in the morning, during some school days, in the evening after they’re asleep, and so on.

I have the power to choose what I want to do. If there’s a task I don’t like doing and don’t find absolutely vital, I either find someone to do it for me (such as hiring someone to do site maintenance or hosting so I don’t have to deal with servers) or I just don’t do it. I am the boss. There is no one handing me a task that doesn’t match my skills or my enjoyment and requiring me to do it.

My income is a lot more variable than it ever was. Some months, I do very well. Other months, I don’t make nearly as much. At my previous job, my income was as steady as a rock.

You have to build your own path. If I’ve learned nothing else about self-employment, it’s that determination is what is going to win the day. The person that keeps chugging away steadily for years is the one that builds something of value. The person that can deal with very little return for many, many hours of work in order to build something that will chug along steadily (and to build a strong skill-set as well) is the person who will succeed with self-employment.

Someone doesn’t just flop tasks on my desk. I have to figure out the tasks myself, and I have to stick with them over the long haul.

It is the last three factors – the variable income, the choosing of one’s own job tasks, and the need to build your own path – that introduces most of the “risk” of self-employment. Here’s how I mitigate those risks.

Variable income We have a pretty strong budget that we stick to. We spend a certain amount of money every month, regardless of my variable income. Virtually every month, I earn more than we spend (let alone my wife’s income), so we put the excess aside into investments and savings.

So, in order to successfully handle self-employment, you need a budget, ideally one that uses a total amount that’s well below what you earn in an average month. The closer your average spending is to your average income, the harder it is to make self-employment work over the long run.

Yes, Sarah and I are “wealth accumulators,” to use a term borrowed from The Millionaire Next Door. We do that by keeping our spending under control and sticking to our budget, so that if self-employment ever does become lean, we have money in the bank to get us through until we figure out what’s next.

Self-motivation I have a place where I do my work. Period. When I’m sitting at that desk facing that computer, I know I’m in “work mode.”

(Unfortunately, the computer I use for writing at the moment is also a “family computer” due to hardware issues, but I keep the family stuff and the games separate from my work by using separate profiles.)

When I need to really bear down and work on a task, I turn off all distractions. I close the door. I turn off my phone. I turn off any messaging programs that might be running. I log onto my “work” profile. I know that this is “game time” and that I need to be productive.

I pay attention to my energy levels and focus, too. I usually have a burst of very good writing time as soon as I wake up, for about an hour or two until I get hungry for breakfast. Mid-morning is usually a good time for writing as well. I try really hard to capitalize on those times for my writing tasks.

Most importantly, I know what’s riding on my work. I know that I need to get out there and get some writing done each and every day, because without that, everything falls apart. I cannot just decide that I don’t want to write today (I do take vacations, but those are planned for in advance). I write quite a bit each and every day during the gaps, as I mentioned above.

Building your own path The Simple Dollar became successful because I didn’t give up on it, even during the slow months where there was little growth on the site. It is easy to get disheartened when you put a few hundred hours into something and see no growth for your efforts.

The thing is, you have to build your own path, and to do that, you have to go through long, boring stretches. Some people call those stretches “the valley of death,” because that’s the phase where it’s easiest to give up on what you’re doing.

I’ve found that by focusing on the tasks for today, I can push through that “valley of death” on my own and find success on the other side.

For example, if I were to look at the number of articles I’ve agreed to write in 2013 – somewhere around 800, at my count – that looks insurmountable. What I do instead is focus on today. My goal for today is to write three articles and, if I can, maybe write another one. If I do that every day (excepting some vacation periods), I will make that goal.

Right now, I’m working with a friend on building a board gaming review and commentary site, mixing videos and written work. (I’ll share a link to it when the ball really gets rolling with the public face of it.) It’s easy to get disheartened when we look at where we know that we need to go in order to make it successful, so instead, once we’ve charted that path, we focus on the tasks that need to be done for today.

It’s doing those daily things, day in and day out, that leads you to where you want to go. Most of the time, those daily tasks are going to feel pretty unrewarding. The real challenge of self-employment is to break through that sense of “unrewarding,” appreciate what you’re doing, and accomplish those tasks you need to accomplish every day.

If you take care of those three things, the risk of self-employment goes down greatly. Virtually every failure story I’ve read when it comes to self-employment is the result of not taking care of one of those three key elements. They lose self-motivation, they get lost in the “valley of death” where they’re not connecting the rewards with their work and they’re not seeing progress on the big picture, or they don’t sensibly manage their money.

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