In most single digit millionaire articles, I talk to other people about their experiences with wealth; and how it’s gained or lost. This week, I’m taking a break from my regular habit of bothering other people with questions (partly because they’ve now started to ignore me).
Instead, I’m going to share why self-employed people who ring in the dough often become financial mismanagement geniuses:
First, what qualifies me to comment on self-employed people?
I’ve been self-employed for my entire career (20+ years), and as consequence, I also know a lot of other self-employed people. To a deeper extent, in fact, than many salaried office workers know their colleagues.
See, unlike the romantic impression of freelancers being rugged lone wolves, we usually end up working in teams with other freelancers. Surprisingly big ones at that.
When a big company wants to start, say, a blog, they’re not going to hire one writer, one videographer, one graphic designer, one mandatory annoying time waster, etc. and have separate contracts for each of them.
They’re just going to hire a project manager, and that manager will round up all the other freelancers, and be a single point of contact (and single contract) with the big client. So really, we’re more like confused cattle that need herding, rather than lone wolves.
After a few decades, you start to recognise the same faces, and you start to share the stories and troubles. And having known these people over the years, some of which are single or even double-digit millionaires*, there’s one thing I’ve learned:
Many of the top earning freelancers have terrible savings and spending habits, and their finances are an absolute dumpster fire.
God help any financial planner who takes them on as clients, because you’d have better success trying to teach dogs to meow.
*Freelancers tend to be very poor or very rich, with few in-between
Unlimited income ceiling! Work as hard as you want!
Congratulations, you’ve now heard the recruitment speech of 99.9% of all sales jobs in the universe.
This is also where the trouble starts. Consider:
Self-employed people are paid in direct proportion to how much they choose to work.
Unlike a 9-to-5 salaried employee (or 9-to-midnight in the case of Singaporean employers), our pay isn’t fixed at the same amount each month.
(I know some employers say if you work harder you’ll earn more, but I’m pretty sure that’s a lie, as every employee I know who works harder has just been rewarded with more work).
If a self-employed person wants more money this month, well, we just take on another job. We can literally decide to work until our eyeballs bleed for three straight months, if we really really want a Prada or a Tissot or a pair of Manolo Blahniks at the end of it.
We’re really motivated, because we see more money come in when we push ourselves. But this also means we tend to be impatient, and save less. We don’t want to budget $X a month to buy something; we’re used to working till our hearts nearly stop, so that we can buy it next Tuesday damn it.
This is also a source of overconfidence
We tend to buy way more things than we need, and ignore potentially serious setbacks because hey, I can just work harder to earn it back.
Overspent by $5,000 on a vacation? Pfft, big deal, that’s like three or four more wedding photoshoots.
Blew $20,000 on a watch? Ah hell, just edit two more videos a month for the next year.
Spent $100,000 on the down payment for a condo? Just make sure you get 10 more renovation projects to work yourself to death on, over the next few years.
It’s by far the worst among those in sales. For these self-employed types getting back the money is as simple as “just sell one more car”, or “just find one more big client”.
Keep in mind that for the sales line, this mentality is aggravated by a constant stream of life coaches and motivational speakers, pumping them with complete overconfidence that they can make more sales.
This also means there’s no sense of consequence
For every bit of financial mismanagement, be it overspending, or a bad investment, or having to write off $23,000 in unpaid fees (which I’ve totally had to do, and I know I’m not alone), the self-employed shrug it off fast.
We shrug it off because. unlike an employee who has a fixed pay cheque, we have a voice at the back of our heads saying “This serious disaster is really just X more hours of work.”
If you’ve ever heard someone use the very Singaporean phrase “Money can earn back one,” I bet you’re dealing with someone who’s (1) self-employed, or (2) working on sales commissions. It’s much rarer to hear something like that from the mouth of a salaried worker.
Because of this sense of recoverability, we self-employed fear mistakes less. That’s NOT a flex. It means we’re inclined to take bigger and stupider risks. If there’s a Ponzi scheme out there, I often find a good number of the victims are self-employed people, people working on commissions, successful freelancers, etc.
Because this is the biggest irony: the same quality that makes us able to survive our volatile careers, is the same quality that lowers our sense of (financial) self-preservation.
We keep compensating for mistakes by doing one more job, and one more job, and one more job…until one day we realise our health is falling apart, we’ve grown old and lack the energy, or we’re just medically too beat up to keep going.
Then the lucky ones are the ones who bought assets in their good days, who have things to liquidate for retirement.
The unlucky ones suddenly find out their finances do not, in fact, regenerate like a mutant with adamantium claws and bad hair; not at that late stage in life.
The worst part is the collateral damage which comes with it
People who are hard on themselves are simultaneously hard on their families, and their friends. As a self-employed person, I used to lie that I work every day except public holidays and my birthday.
It’s a lie because I work on public holidays and my damn birthday too.
But not making time for others erodes relationships, and at the end of the road, we can find ourselves with no family or friends left to put up with our workaholism.
As most financial experts can tell you, this becomes a money problem. People without support networks, in their old age or sickness, have to fork out cash for help. No one is around to do it from a place of love or obligation.
Then there’s the cost of treatment from stress and anxiety and its resulting diseases. I won’t weigh in on that because I’m not a mental health professional, but ask any doctor; you’ll get an earful about the effects of sleep deprivation and a weakened immune system, which is a sentence I’m writing at 4.42 am in the morning. Great.
Tl; dr, successful self-employed people may be more in need of financial advice, not less
There’s a certain pride that comes with being a successful self-employed person, of being able to work a extra few hours, and magically make a few hundred or a few thousand dollars appear.
But don’t mistake that superpower for thinking you’re clever with money. You’re good at making money, sure; but maybe acknowledge you need some help in keeping it. Give a finance expert the time of day, and at least hear them out.
For those of you who aren’t self-employed, but know successful self-employed people: Beware their illusion of financial intelligence.
We are, as I’ve said, are often overconfident, and willing to take on way too much risk. That means you sometimes see us making investments that we call “first-mover,” and that finance experts call “Hahahahahaha you idiot.”
And if you see your high-earning self-employed friend or relative looking stressed, be delicate – they may not be as well off as you suspect. For more on Singapore’s soon-to-be sandwiched class (the single-digit millionaire), follow this blog, and don’t forget to send your questions or help requests.
