What’s Best For Me? Employee, Self-Employed, Entrepreneur or Retirement?

I read this post about two weeks ago and I was rather captivated by the way B actually ranked the various roles that he considered. Be it an employee, entrepreneur, or achieving early retirement.

I was especially enamoured by the table matrix that he came up with. Even though I must have probably done the same weighing and comparing at least subconsciously, I guess nothing beats putting everything down in words and even numbers.

So if we account for money, risk, fulfilment and autonomy, and take a more holistic view towards each role, let’s see if my choice of a self-employed is the best role for me right now.

Employee

• Money: I cannot deny that I do miss the monthly paycheck. Not only that, there’s also the year-end bonuses, performance bonuses and staff benefits that are tied to employment. If I were still in my first company, my remuneration would likely be double of what I earn right now.

• Risk: I am quite risk averse and I guess it’s not an exaggeration to say that both were “iron-rice bowls.” There was little to no risk of being laid off in my mid-40s if I had stayed on.

• Fulfilment: Something’s gotta give, right? Being a small cog in a huge machinery, it’s relatively hard to take pride directly in the work that you do. Typing out emails in a cubicle for the best part of the day doesn’t help too.

• Autonomy: This is the worst part about being an employee. When you have a supervisor, your autonomy gets severely compromised. If he/she disagrees with you, you re-do the proposal. If he/she feels you should sit in for a meeting, you do so. If management feels you are more needed in another department, off you go!

Self-Employed

• Money: For the amount of hours that I put in, the money is really quite decent. On average, I am able to hit quite close to $800/week. When you’re a self-employed, I think you tend to look at weeks instead of months.

• Risk: Besides the volatility (my weekly income ranges from $400- $1200) in income, there is also the probability that some clients could say bye bye to you. SA1 results are out and I will be honest to say that it’s a mixed bag. Although I am not totally responsible for all the good and the bad, some parents hold me totally accountable.

• Fulfilment: Although it’s really not as common as what more tuition agencies claim it to be, there are occasions when a student improves drastically. Like from 60s to 90s or from 40s to 70s. Both the student and the tutor will be smiling more often during lessons and the pride can be immense.

• Autonomy: It’s definitely not complete autonomy. If a friend jio me for coffee or a meal, I can’t simply just not turn up for a scheduled lesson. That would be both arrogant and irresponsible. However, there is definitely more flexibility involved. Once the school holidays start, I would probably be able to free up some weekday evenings and weekends.

Entrepreneur (admittedly, not a lot of experience)

• Money: For the bulk of potential entrepreneurship ventures, they involve sinking in quite a bit of your endowment. Rental and staff are the main costs and its rare for a business to start raking in the profits within the first year. I am recently involved in a small venture and I believe we are breaking even or thereabouts. Of course, the upside can be huge.

• Risk: Besides not earning a single cent from the venture, there is a big risk that one might not be able to recover the sunk cost. And let’s not even talk about the opportunity cost, the employment income one could have received. The stakes are often high when one plunges full-time into entrepreneurship.

• Fulfilment: I think to most entrepreneurs, nothing is sweeter than seeing their convictions turn into reality. Yes, the business model works and they made the right decisions! And of course, I wouldn’t hesitate to suggest that the power and fame that comes along appeals to some too. The last sentence definitely applies to me. But I doubt I would enjoy managing staff.

• Autonomy: No complete autonomy, even when you are the boss. In fact, sometimes, it can even be worse than an employee, since one would want to set an example to his employees. Come in earlier, leave later. I reckon this happens in lots of SMEs in Singapore and I might be like that. But that said, if something urgent crops up or I am sick, there’s no need to apply for leave. And I would only spend time on tasks that yield the maximum results, instead of having to spend precious time justifying it.

Retirement (A 6 month sabbatical counts as experience?)

• Money: I have a feeling that unless I have difficulty spending even 50% of my dividend income, I would not voluntarily retire. Especially if one is retiring even before his 40s. It can be pretty scary dipping into your savings or fund when there’s still 50 years to go. Spending a few hours a week to earn $1,000 a month could be a healthier alternative for me.

• Risk: There is a resume risk. This exists even for a self-employed. If I were to retire for 5 years, and realise that I actually enjoy tutoring more than a retired lifestyle, it might be harder to convince potential clients. That said, if one is prepared to work for minimum wage and enjoy doing it, there is literally little to no risk involved once one accumulates 25-30x his annual spending.

• Fulfilment: It’s hard to rate this since it’s largely dependent on the activities one pursues. Backpacking and slow-travelling might bring immense enjoyment to some while volunteering to help disadvantaged groups might be another’s cup of tea. On the other side of the spectrum, a lack of purpose is possibly one of the worst outcomes.

• Autonomy: Besides answering to my family or friends, I can get almost complete autonomy in what I want to do. Things can get really spontaneous but I would still have to be careful if I don’t want to come across as flippant or irresponsible.

Summary

Let me reiterate again that the scores are entirely based on my perception, experiences and of course, my personality. Another person might easily have a totally different score for each role and there would be nothing wrong with it.

And yes, the higher the score for each category, the better it is. For risk, 9 is good because it’s perceived as lower-risk to me.

Therefore, it’s not surprising that being a self-employed tutor is the best outcome for me at this point in time and in the near future. It’s also quite sobering that employment is the last in the list. I actually thought I would prefer entrepreneurship to retirement, but based on the above metrics, it proved otherwise.

I really feel that this is a good exercise to find out more about ourselves and yes, give it a try and let me know if the status quo is really the best and most suitable option.