The Man Owes You Less Than Nothing – Guest Post

by Ryan

The career track as you know it is not a permanent condition of human life. It’s barely three generations old.

Civilization has been around for maybe 8 millennia. And for 7.9 of those, “career track” meant working on the family farm and eventually inheriting it. That’s if you were lucky and male. If you were female, it involved a lot of spreading your legs and hoping you survived at least enough childbirths to keep the lineage from going extinct.

In the late 19th century, technological advancement reached the point where agriculture exploded – the single biggest economic shift ever. It became so easy to grow more food than you and your family could possibly eat, that it freed up almost all would-be farmers to find new lines of work and create industries out of nothing. Even unglamorous jobs like carpenter and mason became feasible as careers: before then, it was the rare person who had the time or the economic impetus to build a house without living in it himself. Division of labor meant specialization, which resulted in people spending their lives building furniture or writing newspaper columns instead of just squeezing that activity in between the milking and the threshing. Attorneys, bankers and human resources directors were rare throughout most of human history. It’s only in modern times that these gigs have become something that a kid can aspire to. (Not that anyone “aspires” to run an HR department, but you get the concept.)

In the last couple of generations, the career track has been honed to a series of rote steps: do as many extracurricular activities as possible in high school. Get into as prestigious a college as your pedigree and necessarily thin CV will permit. Borrow to pay your tuition. Earn a degree. Go to your college’s job fair and find an employer whose vacation schedule and sexual harassment policy you can live with. Once you get hired, ensure that the times during which you choose to apply yourself coincide with the times your boss is watching. Come early, stay late, play company softball, show up on the occasional Saturday.

If that’s what you want out of life, fine. But understand that that strategy is neither permanent nor logical.

Look at the list of the richest people in the world. Notice anything about them, from Gates to Buffett to Carlos Slim Helu? None of them were salaried employees, at least not past adolescence. Sure, many of them inherited their money and a few might have acquired their fortunes somewhere south of ethically, but that’s not the point. With a handful of exceptions, you can’t achieve the peace and freedom that’s your birthright as a member of Homo sapiens just by filling out your time sheets correctly and handing them in by 5 p.m. Friday. Make partner at your law firm, and you’re committing to a life of greater responsibility at every rung – with more pressure, more gray hairs, and a greater likelihood of commencing that coke habit that all the cool attorneys have. (By the way, the next attorney or middle manager we meet who truly loves his job and its accouterments will be the first.)

This is not a recommendation to spend your life riding the rails and eating hobo stew. It’s a recommendation to start a business. The economic climate is ripe for entrepreneurship, which is ultimately the only thing that keeps progress progressing.

Huh? What are you talking about? The economy sucks on wheels.

Exactly. The dim affluence you could have enjoyed by staying in your loathsome job circa 2005 no longer exists. With every 8th American officially unemployed, you have to work harder just to tread water and keep your position. More misery, same result, only this time the result is more tenuous.

When you’re your own boss, this becomes a non-issue. All of a sudden, being productive and moving assets from lower-valued to higher-valued uses becomes more important than striking the right balance between not laughing at your boss’ jokes and laughing too hard.

Regardless of the nation’s regulatory climate, the cost of entry to entrepreneurship in 2010 is less than it’s ever been. Starting a software development company or a pool-cleaning business costs nothing more than an initial outlay of a few hundred bucks, if that. We talk about a rate of return for everything from bond funds to new industrial processes, but the rate of return on a sufficiently motivated human dwarfs anything you’ll find during even the most effervescent of stock-market bubbles.

There are tangible reasons for doing this, too. Arrange your business as an LLC or S corporation, and you’ll enjoy tax advantages that salaried and waged employees never experience. You can earmark much of what you buy and use in your daily life for exemptions and even credits. How this can be construed as worse than just having the same FICA deductions confiscated from your semimonthly paychecks is beyond us. Want to learn more? Modesty prevents me from telling you where you can, but someone wrote a useful book on the topic.

Greg McFarlane is an advertising copywriter who lives in Las Vegas and Lahaina – testament to the power of entrepreneurship. He recently wrote Control Your Cash: Making Money Make Sense, a financial primer for people in their 20s and 30s who know nothing about money. Buy the book here (physical) or here (Kindle) and reach Greg at greg@ControlYourCash.com.

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{ 10 comments… read them below or add one }

Kevin June 10, 2010 at 2:46 pm

I think people are talking a lot about starting their own businesses these days because as the economy tanked people realized that starting a business is about as risky as having a 9-5.
The sad thing is, as the economy gets better, the risks of starting a business seem to get bigger. With that less people will work for themselves and more people will work 9-5.
I’m hoping to get my business going so when the economy comes around I’ll be able to leave the workforce and not be a part of that boomerang.
.-= Kevin´s last blog ..Yakezie Thursday =-.

Betty Kincaid June 10, 2010 at 8:06 pm

@Kevin “…as the economy tanked people realized that starting a business is about as risky as having a 9-5.”

Exactly. The days of getting a job for the health insurance, steady paychecks or other perks are long over (unless you work for a union or the government.)

There are thousands of needs in your community. Why not profit from filling them?
All you have to do is decide:
1) what is the need?
2) how much will someone pay to have that need filled?
4) Can I efficiently (cost effectively) get the job done?

Good luck!

Betty Kincaid June 11, 2010 at 4:59 am

@KevinM

The IRS allows you to deduct all business related expenses which include, but aren’t limited to, business use of your car, dues and subscriptions, offices supplies, equipment (including your cell phone, computer, etc), utilities and the list goes on and on. Most of these items can’t be deducted from your W-2 income despite the fact that most salaried workers have similar expenses.

You have to pay yourself a reasonable salary and that salary is subject to social security and medicare taxation. Since you’re both the employer and employee you pay the full (or as Kevin puts it 2X) amount BUT if you think the taxes paid ON YOUR BEHALF by your employer isn’t somehow calculated into your salary then I’ve got some real estate in Las Vegas to sell you.

Bottom line…The farther and the more often you step out of your comfort zone, the greater the possibilities you’ll see.

Betty
.-= Betty Kincaid´s last blog ..If a Containment Dome Doesn’t Work, Try Screaming =-.

Kevin M June 11, 2010 at 3:47 am

Good article until this part:

“Arrange your business as an LLC or S corporation, and you’ll enjoy tax advantages that salaried and waged employees never experience. You can earmark much of what you buy and use in your daily life for exemptions and even credits. How this can be construed as worse than just having the same FICA deductions confiscated from your semimonthly paychecks is beyond us. Want to learn more? Modesty prevents me from telling you where you can, but someone wrote a useful book on the topic.”

To deduct expenses for a business, they must be business related. He seems to hint otherwise here. Also, S Corp shareholders who take salary pay FICA tax and LLC members pay S/E tax – which is 2 times an employee FICA tax since they are both the employee and employer. Bottom line, don’t go into business for yourself thinking you’re going to deduct everything, the IRS will have something to say about that.

Kevin M June 11, 2010 at 6:33 am

@Betty – all the things listed in your first paragraph can be deducted against W-2 income on Schedule A. Unless of course they are reimbursed by your employer, which is even better.

I’m not arguing which is better – employee or self-employment, just trying to point out the author’s last paragraph was misleading at best.

Darren June 11, 2010 at 8:04 am

I agree with Kevin and Betty.

Yes, starting your own business can be risky. But so is relying on one employer to take care of you for life and relying on that one source of income. With all the changes in the workplace these days, I doubt that’ll be a reality.

I don’t know if there’s ever a good time to start a business. When the economy is down, people will complain that it’s too hard. When the economy is up, people will rationalize that they can just work an easier 9-5 job. I think it’s better to just make plans and move forward.
.-= Darren´s last blog ..Business Advice – What We Can Learn From Amish Success =-.

Lee | Search Engine Viking June 11, 2010 at 8:36 am

Man, Greg can WRITE! Loved his sense of humor and, from what I can tell, his love of “Gun, Germs and Steel” (the book about human society evolution and domination).

What he says is so incredibly true. I was just speaking with my mother about this very same thing yesterday. About how the “corporate” lifestyle is very modern, and that it’s not “stupid” not to have middle management aspirations.

If I make it through the rest of my life without going back to the man – even if it means living on a sleeping bag under a bridge – I’ll be a very happy camper.

p.s. I’m going to check out Greg’s book!

Rock On
Lee
.-= Lee | Search Engine Viking´s last blog ..Weekly Rockstar Blog: June 11, 2010 =-.

Aury (Thunderdrake) June 13, 2010 at 9:25 am

Absolutely amazing post, to say the least. A lot I agree with pretty profoundly.

Once I get my ventures up and going, I wanted to open up an LLC and shelter my assets in that, perhaps even funnel the income through the FTE.

But the richest among us certainly do not depend on government hand me downs…
.-= Aury (Thunderdrake)´s last blog ..The 3 Cornerstones of Investing (The Dragon’s Hoard) =-.

Monevator June 19, 2010 at 2:22 am

Great article Greg. The history of human civilisation is even more telling than he says though.

We didn’t jump from hunter/gatherer to division of labour. In between was hundreds of years were people were effectively their own employers. The miller owned his mill. The blacksmith ran his own smith. Market traders had their stalls.

Having your own business has a longer history than working for the man for 40 years. Doesn’t make it any easier, but it does at least give self-starting a good pedigree.
.-= Monevator´s last blog ..Researching moving abroad =-.

Laura July 27, 2010 at 1:09 pm

I’d love to start my own business… what could possibly be better than being your own boss? But it also comes with much higher risk. You invest in the company and your investment goes south, you could find yourself living off the street. Maybe we should just revert to apprenticeships?
.-= Laura´s last blog ..July Financial News You May Have Missed =-.

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