We have spent a lot of time of late discussing the benefits of consulting positions – developing strong credentials faster, gaining industry insider status, having greater career control. But we haven’t yet discussed the income and tax benefits that follow from this line of work. They may not be the most compelling reason to become a consultant, but they’re still important to understand, especially if you’re seriously contemplating a change. Here’s what you should know:
Income
Having a full- or part-time job provides you with a steady source of income and possibly a clear path to making more. Moving into consulting removes this security blanket because you will have to find your own assignments and negotiate for fair compensation. Not having steady checks coming in can be a source of anxiety, but the freedom afforded by consulting creates new earning opportunities. The amount you make on a three-month consulting assignment could exceed your previous yearly income. Even better, you have no ceiling placed on your earning potential, giving you the mobility to move up in income brackets if you have the desire and determination.
Benefits
Like income, the reliability of employer-provided benefits is easy to get used to. When you become a consultant, those medical, retirement, and lifestyle benefits will go away. That’s important to fully understand and consider if the benefits you receive now are essential to your quality of life. But consider that there could be benefits to untethering yourself to your employer. If you’re stuck in an anemic health plan or worried about adequate retirement savings, becoming self-employed empowers you to make your own choices. Plus, benefits you rely on now, like subsidized daycare or on-site gym facilities, could become a lot less necessary once you have control of your own schedule.
Taxes
Taking full responsibility for your own taxes is one of the hardest things to adapt to as a new consultant. You will need to track your expenses and income, actively save money to pay your tax debt, and become diligent about reporting and filing. It’s possible, though not guaranteed, that your taxes will go up as a result. If you are clever about running your business and finding applicable deductions, however, they could actually go down. There is also the appealing possibility that your taxes go up simply because you are making more money.
It’s never a good idea to pursue a line of work that pays you less than you need to live. But if you understand the income and tax implications of consulting and know how to make things work to your benefit, it can prove to be a very lucrative career move. Find clients eager to enlist your expertise by partnering with The Squires Group.
