The Secret Code to the New Economy: 1099
Posted: Monday, June 15, 2009
by Bruce Horst
WryteStuff
For at least the past 6 months I've been asking every financial or business leader that I speak with what the 'new economy' will look like after this current recession has taken its toll and reshaped America's economy. I've been surprised at the low number of items I've found contention on–most are in agreement. It seems that the code for the new economy in America is in fact '1099'. There is also a consensus that like every major recession before, there will be many millionaires made during this period despite the incredible loss of employment and income.
What does this have to do with the new economy? Well, basically, the time has passed where a person can expect a lifetime of employment from one company. In the New Economy, a company will only pay for services when it is financially beneficial for the company to pay for someone outside of the company to perform such services. In layman's terms, it's a hire-as-needed arrangement. There are definite downfalls to this arrangement, just as there are definite advantages to this arrangement. My hope is that you may exploit the advantages of this arrangement to create a better living environment for yourself and your family than was otherwise feasible. Let's explore the problems and the benefits of being a 1099 contractor.
The problems of being a 1099 contractor:
You might not know where your next meal is coming from. It's true. Without a consistent paycheck, you will have to earn every dollar that you are paid. This may be a bad thing, or it could be a good thing if you can earn your income without having to share it with your boss or the company that you work for. It is true that 90% of $100,000 is better than 10% of $100,000, but you have to work for it.
Your work schedule is not consistent. You might have to work for 24 hours straight to meet deadlines, then you might have 3 weeks with nothing to do but read up on industry trends to keep yourself current. The cool thing is that you can read up on industry trends by the pool while your kids are splashing and swimming.
Your employee benefits are now yours to provide. I've found this to be the hardest part to overcome. Without a group insurance plan, you are forced to buy an individual insurance policy. This issue alone might cause you to support nationalized health care, or ask your spouse to work outside the home so that he or she can provide group insurance for your family.
Without sick pay or vacation pay, you might have to take a laptop on family vacations, along with a portable internet connection (all tax-deductible, of course). This means that at 6 am while your family sleeps, you are answering email and making sure business is going smoothly. Vacation pay and sick pay are things of the past, but it's not that hard to keep up with email from the bedroom of your vacation resort. Personally, I suffer from occasional back problems. This forces me to answer email from my recliner in front of my 52 inch LCD TV every few months. Oh the horror!
You will need to market yourself. To some, this comes naturally. To the vast majority of the rest of us, we have to work hard to learn marketing. Subscribe to industry or trade magazines and newsletters and learn from what works. Play around with different advertising vehicles to learn what's popular and what's not. Hang out with others who have accomplished what you want to accomplish, and learn from them. Read, read, read. It's all part of the biz.
The benefits of being a 1099 contractor:
A wide range of tax advantages. Want to go to San Francisco for the weekend? There are hundreds of reasons to call this a business expense! Mileage for your car, supplementing your restaurant bill when you eat with possible 'clients', paying your kids for the help they perform around your 'office', these are all at least partially tax deductible! Become familiar with IRS form 1040 Schedule C. As a small business owner, it is your friend.
Your work schedule is flexible. Work like a madman for 3 weeks, then go to Disney with your kids (or grandkids) for a week. Go to the gym every morning and watch the commuter traffic get all jammed up on the morning news shows, while you are taking care of your physical health better than 95% of the rest of America. Be home when your kids get off the school bus just in case you receive that important phone call. Stay home with your kids over summer vacation while you work on that special project. It takes some getting used to, but it's not all bad!
You control your own destiny. You're never going to get rich working for someone else and you know it. Working for yourself opens up a whole range of possibilities that you otherwise would not have a chance at. You might earn only $1,000 a month for a few months and then you have a $50,000 month, followed by more low months before you hit the jackpot again. This is typically how it works, but you have to be committed to making it happen.
What if You Are Already Employed?
Be thankful! The benefits of operating a small business are the same even if you have to operate it on the side of your regular employment. Having a side business could be your ace in the hole, allowing your to conduct yourself at your job with confidence, knowing your have other options.
Bottom line:
My experience is that as an independent contractor I might work for 20 businesses at a time. The top 5 of which will provide a combined income greater than I've ever received before as an employee. Is it worth it? You bet it is! I work in partnership with my wife, which allows us to spend a lot of time together. My kids have a great example of what it's like to deal with the real world in business, not to mention the fact that they see why it is important to get a good education. Not everyone working for 1099's makes a decent living, but I've been fortunate in this area. I'm convinced that this is the new economy, and I'm ready and willing to take advantage of it.
Are you ready and willing to take advantage of the New Economy?
Contact Bruce at brucehorst@gmail.com
This Article has been viewed 2,914 times. (Not updated in real-time.)
More commentsAgain Bruce, thanks for the pointers. We need a lot of financial expertise outside of our own sometimes.
So interesting to learn how things work in other countries. Very informative. We have PAYG (pay as you go) for the contractor and self-employed folks. Similar, and the insurance we have to take for is WorkCover in case employees are hurt on the job. Health insurance is a personal matter not an employer matter. We all pay a specific tax for health cover which covers doctor and hospital charges, but some things are not covered in full. If we want private insurance, we organise and pay that ourselves. Some benefits, but you can still end up paying additional costs. Bit off the point, sorry! lol
Thanks for the interesting article.
Hannah
Bruce-Great article! It gave us a lot to think about! Wish it was more consistent as far as income goes, but maybe one day it will be! thanks for sharing!
You really have your priorities straight and know your stuff! :) I hope your business continues to grow!
Thanks for this piece Bruce.Pedro Talavera.
Don't forget to incorporate for tax benefits and asset protection. You can use an corporation or LLC. It is best to get an attorney experienced in corporations to draw these up for you.
Of course, it depends on what sort of industry you're in. For example, technology skills tend to make it easier to do this sort of thing.In my opinion, those who do best in any sort of economy are those who provide value. In order to be payed, and payed well, you have to provide something that people find value. Rather than go work for a corporation filling out TPS reports, I'd rather build up a skill set that people need. In a sense, it's about how you can help people.
Smart Man whom we'd like to chat with further, on recession proofing!Thanks, OCReef dot com web store owners
Right on the money Bruce! Been an independent contractor my whole adult life and could never be a 9 to 5 type. God Bless the USA where we can make our own opportunities!
Thanks Bruce, it sounds like what my Mother use to say, "like is a gamble baby, you are going to win and not win." As I grew I understood what she meant, "everything has a season."
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