1) Do you value financial stability? Income from jobs tends to be steady. You get paid the same amount twice each month and then once a year, you get a raise if all is going well. Income from other money-making systems tends to vary. It may go up and down each month. However, it might also go up every month.

If you freak out at the thought of not knowing how much money will be deposited into your checking account next month, then you should probably choose to make money as an employee. However, if you are excited about the possibility of your income going up each month, and are comfortable that you can still make your finances work if your income dips, then you should consider other ways to make money.

2) Do you value freedom? Some people hate to be tied down. Whether it’s staying in the same city or having to be somewhere at a certain time, the lack of freedom grates on their nerves every day. These people should not have a job; or at least not a typical job where you don’t get paid unless you do certain tasks in certain places at certain times.

If you are one of these people, then you need to find a way to make passive income. Money-making systems that create passive income work for you while you’re doing other things. That way you are free to go anywhere at any time without disrupting your business. You still have to do work, but since you own the system you can decide when and where that work is done.

3) Do you want to be the boss? I know some people who really do just want to go to work every day, do a particular job or task, and collect their paycheck. They thrive on the accountability that a job provides. And they like that they can just “do their job”. They like that they are not responsible for making the decisions for the whole business. If this sounds like you, then you should choose to make money as an employee

Others would rather rub their skin with sandpaper than have to deal with a boss that checks to see if you’ve done your work, asks how you did the work, and tells you what to do next. These people need to find some other way to make money or they will grind their teeth to nubs before they are forty. Now don’t get me wrong, other systems of making money require work. There’s just no one telling you what to do and when to do it except you.

4) Do you have a pre-existing health condition? Unfortunately in our country, you have to be extremely healthy to get health insurance as individual. Even if you’re just receiving maintenance care (e.g., seeing a chiropractor) to prevent big problems down the road, you will probably not qualify for affordable health insurance except through an employee group plan. In this case, you may have to suck it up and work as an employee until you are creating enough income through other sources to be able to self-insure or buy very expensive coverage.

5) Are you living the life that you want to live? This is the most important questions of the five, so take a few minutes to really think about this one. What would your daily life look like if you didn’t have to consider finances? Would you still choose to go to your job every workday? Or would you stay at home and play with your children? Would you write a book, or start a business? Would you stay up late every night and sleep till 10?

Now, is there a away that you can achieve the life that you want while funding that life through a job? It doesn’t have to be the job that you have now. It could be any job that you can think of.

If you can’t live the life that you want to live while working in your current job, then it’s time to leave. Based on how you answered the first four questions, you may need to find another job. Or, you may need to find other ways to make money. Either way, don’t hesitate to live the life that you want to live. Don’t fear the changes that you’ll have to make. You only get to live each moment once. Make the most of each one that you’re given.

While making money as an employee is a good option for many people, most of us (including myself) never made a conscious decision to make money from employment. We just fell into it by default. And that’s the problem. If you’ve never evaluated the benefits and risks of being an employee and compared them to the risks and benefits of other ways to make money, then you may have set yourself up for some avoidable displeasure.

In this post, we’ll begin to step back and take a fair look at employment. First we’ll discuss the basics of the system and then we’ll look at some pros and cons of employment. We’re also going to introduce some criteria that we’ll use to evaluate any income system, whether it’s being an employee, making money online, or investing your money. The criteria we use to evaluate income systems are as follows: The Asset – what exactly it is that is making money in this system; The Cash Inflows – specifically how income is received from this system; The Taxes – how the system and the income it generates are taxed; The Cash Outflows – the expenses and debts created by the system; and lastly, System Control – who exactly controls and runs the system.

Looking at these criteria allow us to systematically examine any method of making money and determine what the pros and cons of that system are. Let’s now take a look at employment as a system for making money.

The Asset:

All systems of making money fall into one of two categories:

1)trading the use of an asset for money, or
2)creating or adding value to an asset that you then sell.

Employment falls into the former category since you are the asset that is being traded for money.

Think about that for a minute. Does that seem a bit Orwellian to you? “You are the asset that is being traded for money.” If you strip away all of the emotional and human aspects of your job and just look at it from a financial standpoint, that’s exactly what is happening. Or, if we want to be more specific, your time is the asset being traded for money. You go to work, give eight hours of your life to your boss, and he or she pays you a salary. If you stop giving him your time, he stops giving you his money.

The Cash Inflows:

Typically an employee agrees to perform specified tasks or meet certain goals in exchange for cash pay and non-cash benefits. Wages are generally received on a weekly, biweekly or semi-monthly schedule. Benefits may include paid vacation, paid sick-days, subsidized health and life insurance, and training.

The Taxes:

Wages from employment are generally subject to federal, state, and local income taxes as well as payroll taxes (FICA and Medicare). These taxes are withheld from each paycheck so there is minimal opportunity for tax planning or tax deferral. This is important to note since taxes on wages are generally higher than on other forms of income.

For example, if I were making $400,000 a year (I’m not yet) then I would pay tax at the following rates:

Federal: 35% of taxable income
State: 5% of taxable income
County: 1% of gross wages
City: 0.5% of gross wages
Payroll: 7.65 of gross wages

That’s a total of 49.15%. So for every additional dollar earned I only get to keep 51 cents. However, if that additional dollar of income came from a rental property then I could keep 60 cents. And if the additional dollar came from a capital investment in a business then I could keep 80 cents.

Cash Outflows

Working as an employee also causes you to incur expenses. You will probably have automobile expenses due to a commute, and could possibly even need to purchase an additional vehicle. On top of that, additional costs for clothing, medical treatments, food, and insurance should be expected.

System Control

When you work as an employee, the system that is generating your money (the business that you work for) is going to be owned and controlled by one of several people – it might be your boss, it might be a group of partners (such as a law firm) or, in a large company, it might be the shareholders. The important thing to note here is that in all of these situations, the system is not controlled by you. You will generally have little to no say in the operation of the business, the clients it takes, or how much money it makes.

This is part one of our look at employment as a system to make money. Hopefully this has helped you think about having a typical job in a new light. In our next post, we’ll examine employment further and see when it’s a good idea to have a job and when it’s not such a good idea.