Analysis | Gen Z, Keep Your Day Job. Being Your Own Boss Is Hard.

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American work culture often puts entrepreneurship on a pedestal. For many, building a successful company so they can be their own boss is the ultimate career achievement. Blame “Shark Tank.”

Well, not quite. The fixation on ownership and creating something makes sense given the immigrant fabric of our nation and the general ethos that sacrifice and hard work will determine your future. Of course, the nostalgia for the American Dream doesn’t account for the systemic barriers that exist.

The work-for-yourself idealization only seems to have intensified during the pandemic. Splashy content on social media features former cogs in the corporate machine who ditched the grind for their passion projects. Self-proclaimed business gurus scream about how you too can opt out of working for the man. It’s no surprise that 45% of members of Generation Z report being very or extremely likely to start their own business one day, according to a 2021 Gen Z Segmentation Study from Ernst & Young LLP.

But before you consider giving your two weeks’ notice to jump into a life of being your own boss, it’s important to identify what’s so bothersome about your current employment situation. Will being your own boss really solve your underlying tension? Remember, employees still have a lot of leverage, and they may be able to win concessions on the things that make self-employment so appealing. For example, if it’s the flexibility to work from home you’re after, that’s something more employers are open to negotiating.

When I was 27, I decided to become my own boss after just five years of working as a traditional employee. As a generally risk-averse person, it took several years (along with building a significant emergency savings fund) to talk myself into betting on me. So much of deciding to be your own boss and creating success and stability comes down to knowing yourself. Frankly, it’s not nearly as glamorous as the internet and “Shark Tank” have led you to believe.

How do you handle uncertainty and stress? The transition often means never knowing exactly how much you’re going to make each year, which can make investing for growth or building a personal financial plan tricky. Do you have the financial resources, time, patience and managerial skills to outsource and train someone, or are you more of a lone cowboy, which could stagnate growth? Have you been slowly working on your dreams as a side hustle that’s proven to be profitable and now you’re taking a risk after already beta testing? Or are you taking a leap with no minimum viable product?

But perhaps the largest consideration for the traditionally employed: Are you OK giving up the perks of being employed? Yes, it can be trying to work for a company, but there are certainly trade-offs.

Let’s start with the obvious. As a traditionally employed person, you get a steady paycheck, unless you work on commission. The majority of traditionally employed folks are receiving regular paychecks that make it easier to budget and build a financial plan. It’s easier to gain access to credit and loans, especially a mortgage or auto loan. A full-time job often comes with benefits like health insurance, employer-matched retirement accounts, paid vacation time and parental leave (or a disability plan that might subsidize parental leave). Plus, you probably have access to an IT team when something glitches with your computer and HR to turn to for questions about benefits. You might even have access to an administrative assistant if you climb high enough on the corporate ladder.

Perhaps only a few of those perks apply to you, but let’s talk about taxes. Working a single job makes filing your tax return a simple process compared to running your own business, especially with potentially dozens of clients who send you a 1099 tax form. Self-employed people pay a self-employment tax. The self-employment tax rate is 15.3% in 2022; 12.4% goes to Social Security and 2.9% goes toward Medicare. When you’re traditionally employed, your employer pays for part of what you owe to Social Security and Medicare.

Let’s look just at Social Security. A person with an employer will usually pay a 6.2% tax and their employer will pay the other 6.2%. I’ve paid five times what any previous employer did, because for the last seven years I’ve been responsible for all 12.4% and I earn significantly more than I ever did as a traditional employee. Sure, you can deduct the employer portion from your income tax, but it’s still an additional cost of being your own boss.

Outside of the obvious workplace benefits and a paycheck, there are also emotional and relationship benefits of being part of a workplace, like mentorship. Entrepreneurs can, and certainly should, find mentors — but it often takes significantly more effort. It can be even more challenging if you don’t live in a city or town with access to networking groups, events or even a support system for fellow entrepreneurs.

Isolation is another under-discussed and seemingly rarely-thought-about part of stepping away from the traditional office environment. Being your own boss can mean long hours and many days of working entirely without real human interaction. Depending on your personality type, this can be a dream situation or a horror show.

Personally, I don’t regret making the decision to work for myself. However, there are many times when I stress about the trajectory of my career without the benefit of a more linear path laid out. There are moments I miss happy hours with co-workers or silly chitchat in the office kitchen. There are times I wish I didn’t have to handle every element of running my own business with what feels like significantly higher stakes if I trip up.

While this all might sound like a propaganda piece for Corporate America, it’s not meant to completely dissuade the next crop of bosses from packing up their desks and logging off Slack. Instead, it’s a request to sit with your motivation and do the math on the true cost of walking away in a country with so few social safety nets. The cost of funding your own health insurance alone (especially if you’re older than 30) could be a major financial burden in the early part of your endeavor.

There are many days I’m deeply grateful for the flexibility I hold in being my own boss. But there are others where I’m just exhausted at the never-ending to-do list and realize that success or failure completely rests on my shoulders. Slacking off for a few days means I won’t get paid. On the other hand, I rarely have to suffer through inane meetings anymore.

More From Bloomberg Opinion:

• Gen Z Has It a Lot Harder Than Millennials: Allison Schrager

• Quiet Quitting Is a Fake Workplace Trend: Sarah Green Carmichael

• Gen Z Thinks ‘The Money Will Come Back.’ Will It?: Erin Lowry

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Erin Lowry is a Bloomberg Opinion columnist covering personal finance. She is the author of the three-part “Broke Millennial” series.

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