Self-Employment: Smart Option or Income Trap?

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Self-Employment: Smart Option or Income Trap?

Apr 1st, 2008 by Kenny

Why do hundreds of people chuck in their job every day to journey down the road to become self-employed?

In the vast majority of cases, it’s to escape the income trap a normal worker-boss relationship perpetuates – i.e. if you stay a “worker” then you stay in this one-to-one relationship that exists between worker and boss, where you exchange your skills and effort in return for a fixed wage every week.

The only way you can get money is to come back and do the same things all over again next week… or maybe do a little more work to get a little more pay.

This linear relationship – you work, and then get paid – fixes your income. It commits you to a life of “more of the same” week in and week out, and never really provides the extra needed to escape this cycle.

Now since the “boss” appears to be the winner here, the theory is that becoming your own boss is the first step on the road to wealth.

But is it really?

When you think of someone who is self-employed, whom do you think of?

Do you think of trades people like a plumber or mechanic? Perhaps you think of a shopkeeper or take-away shop owner?

Have these self-employed people escaped the linear income trap and put themselves on the road to wealth?

No! They are still earning a linear income, because they only make money once from each person they sell or provide a service to.

While they can maybe earn more than they could as a worker, it does come with the added costs of working longer hours, extra responsibility, and financial liability. And their income potential is still limited because they can only work for a fixed number of hours.

When seeking out self-employment opportunities, avoid those that revolve around linear income where you repeatedly do the same tasks in order to earn an income.

Instead, locate those opportunities that allow you to build residual (or passive) income.

While these do take some effort to set up initially, only a little maintenance is needed once underway to keep the income flowing in.

And what are you doing while it’s earning money?

If you are smart, you are looking to find and build another opportunity to generate recurring, long-term income for you, while you sleep, when you are on holiday, or even after you’ve retired!

Whatever you do as a self employed person; you will have to work hard at it to make it work.