How many Americans would you guess are self-employed? One out of 10? One out of five? It’s actually about one out of three. According to the Bureau of Labor Statistics, about 15 million people identify as independent workers, which includes freelancers as well as consultants, traditional business owners and independent contractors.

Many more Americans likely wonder if they should be in business for themselves. Self-employment may seem like a dream, but there are risks and downsides, even for successful entrepreneurs.

Since I took the leap to self-employment when I quit my job in May 2012, I’ve experienced the ups and downs firsthand. If you’ve been wondering how great self-employed life can be, check out these pros and cons:


Set your own schedule

Being able to work when you want is a huge advantage of being self-employed. You’re not forced to work 9-5 for 40+ hours a week. If you need time off, you decide when you take it.

A flexible schedule can allow you to spend more time with your kids. Whether it’s working while they’re at school or at night once they’re asleep, it’s possible to build a business to maximize time with family.

Work from home or from wherever you want

Many self-employed workers can skip long commutes, reducing the cost and stress of driving as well as saving time.

As Mr. Money Mustache points out, the cost of commuting to work is much larger than it appears. Since the pandemic forced many people to work from home, commuters discovered they suddenly had extra time to catch up on chores, spend time with family, or make money. It’s estimated that Americans will lose about 10,000 dollars a year if they return to the office—and the daily commute.

Not having to work from an office means you can work at home or while traveling. In my case, I can freelance from anywhere with an Internet connection, which I recently did on my month-long trip to Thailand and France.

More control over your income

The self-employed are directly responsible for their income. While the lack of a regular paycheck might be terrifying to some, others see the opportunity to earn more.

There’s often more flexibility for self-employed work, too. Choosing the projects I take on and whom I work with is important to me. If work comes my way that’s not worth my time or doesn’t interest me, I can say no (and often do). Good luck trying that with your boss.

Building a business opens the door to generating income passively and through multiple income streams. While it’s not this way for all self-employed individuals, it’s virtually impossible with a job.

Claim business expenses

The self-employed can claim tax-deductible business expenses that aren’t open to employees. This can include business equipment, meals, business trips and more. Although many employers might cover these costs and there are tax deductions for employees who work from home, the self-employed definitely have an advantage.

Want to learn how to take full advantage of the U.S. tax code as a self-employed worker? If so, you may want to consider taking the Deduct Everything – Your Blueprint to Tax-Free Living course from Cofield’s Concepts.

In the course, Carter Cofield (CPA, PFS) explains the ins and outs of how to turn personal expenses into tax-deductible business expenses. Course-takers also get a starter sheet of 35+ deductions to look for.

Bosses, offices and meetings are out

A major pet peeve of mine as an employee: pointless meetings. Most meetings I went to went on for way too long, had no goals, and just wasted everyone’s time.

If you’re self-employed, you can say no to meetings whenever you want. You also don’t have to answer to a boss or deal with co-workers you don’t like, which can relieve a lot of stress.

There’s often no need to wear or buy work clothes. I don’t need to spend money on pants and shirts just for the office, and I haven’t worn khakis in almost a year.


Self-employment taxes

Self-employed individuals pay extra tax above what employees pay.

The payroll tax of 15.3 percent is split evenly between employees and employers. Self-employed workers have to pay this entire tax themselves, increasing their tax rate by 7.65 percent.

No benefits

Probably the most unrecognized challenge of being self-employed is making up for the benefits jobs provide.

Health insurance for the self-employed can be very expensive and hard to find.

When you work for yourself, there are no paid holidays, vacations or sick days. If you can’t or don’t work, you don’t get paid.

There’s no 401(k) match, so you’re on your own for retirement savings.

The loss of all these benefits (plus the extra taxes) means you have to earn more when you’re self-employed than you do as an employee to maintain the same level of income after factoring in the value of these benefits.

Irregular and non-guaranteed pay

Many self-employed individuals have irregular incomes, making it harder to manage money. This can make paying bills difficult if you earned less than expected or if a client is late paying an invoice. The self-employed often need to keep larger emergency funds because of this.

If you work for yourself, pay isn’t guaranteed. You must complete the work first and to a client’s satisfaction. While employees often can just come in the next day and finish what’s not done by 5 p.m., self-employed workers don’t enjoy this luxury without putting their income at risk. The result is that careful budgeting is a must.

Read more: 92 Painless Ways to Save Money

Some self-employed perks are overrated

While some of the benefits of being self-employed compared with working are nice, not everything you hear is as amazing as it seems.

Before I quit my job, I thought working at home in my pajamas would be awesome. But I was wrong. I felt lonely, bored and got less work done.

Instead, I joined a co-working space, where I show up showered and appropriately dressed, and can socialize with other remote workers. I bike a few miles to the office, and it’s a commute I enjoy.

No definite end to the workday

For many employees, there’s a definite start and end to the workday. If you don’t get your work done, you can handle it tomorrow. When the weekend rolls around, you’re off the clock until Monday.

For the self-employed, it’s easy to work long hours, including on nights and weekends. There’s always something else on your to-do list, and the work can go on forever if you don’t set limits.

Should you be self-employed?

Even though I love being self-employed, I don’t think it’s for everyone.

For those who love their jobs and are paid well, there’s often little reason for them to consider self-employment. Being self-employed is riskier for most, which might not suit workers who enjoy a stable income.

If you are interested in testing self-employment, I’d suggest a compromise: try self-employment on the side first. I was a part-time freelancer for more than a year before quitting my job. Not only did I have a better understanding of what self-employment was like, but I had a side income that made the transition much easier once I quit.

Have you tried self-employment? Let us know in the comments what pros and cons you’d add to the list.


  • Jeffrey Trull

    Jeffrey Trull has more than a decade of experience writing about personal finance. His work has been featured on Money Talks News Student Loan Hero, MSN Money, and MainStreet. Jeffrey has a Bachelor's Degree from the University of Massachusetts Dartmouth and a Master's Degree from Tufts University.