There are a number of key reasons for this, and many of these reasons are tied into the weaknesses which are associated with being self employed. When you are an employee, you are a subordinate who is paid to work for someone else. When you're a big business owner, you have at least 500 people working for you. When you become a successful investor, this means that your money is working for you. When you become self employed, you are your own boss, and you're the system itself. The biggest downside to this situation is that if the system goes down, this means that your income disappears.
In other words, if you should become sick, and can no longer service your accounts, this means that you won't be paid. In contrast, an investor or big business owner can continue earning money regardless of whether or not they are physically working. The biggest downside to being self employed is that you're totally reliant on yourself, and if you become ill, injured, or simply burned out, your income can be totally eradicated.
Another problem with being self employed is that the more successful you become, the more you will have to work. As you continue to do a good job for your clients, these clients will refer you to more clients, and before you know it, you will have a large network of people to earn money from. While this is great in terms of your income, the simple truth is that as your network grows, you will become more exhausted, and will eventually not be able to handle all your accounts with maximum efficiency. At this point, you will face the challenge that all freelancers face at this level, and this is the challenge of figuring out how to service all your clients while maintaining high quality simultaneously, a difficult challenge indeed.
If you attempt to service all the accounts alone, you will burn yourself out, but if you make the decision to hire assistants, it will be critical for you to make sure they're able to operate at the same level you do. The problem is, many self employed people are perfectionists at heart, and it is hard for them to find someone who can perform a task at the same level they do. Additionally, you may have your own style, one that you do not want others to use, and there is always the possibility that your assistant could take away your clients and compete with you. What do you do?
It is at this point where most self employed people stop, either maintaining a network of clients they can handle, or succumbing to burn out. It is at this point that you must make the decision to transition from being self employed into being an investor. We will talk more about this in later chapters, but the fact of the matter is that you have little choice if you wish to become truly rich, because by itself, self employment is not enough to bring you true riches, since there is only so much one person can do alone, regardless of how talented they are.
Statistics show that burn out is a bigger problem among self employed people than it is for others. This is because many of the fields in which freelancers work in require a high level of concentration and attention to detail. In many areas of expertise, the freelancer cannot afford to make mistakes; they must be flawless when it comes to applying their skills. Over time, this can have an adverse mental effect on the freelancer, and working too intensely without taking sufficient breaks will gradually lead to burn out and a decline in mental efficiency.
Another disadvantage of being self employed is that, while the self employed freelancer has better tax advantages than someone who is an employee, if they are a U.S. citizen, they are still entitled to pay the dreaded “self employment” tax, which will form a major obstacle when it comes to their ability to become financially free. To make things worse, as of this writing, the freelancer must also pay much higher rates for health insurance when compared to employees, and it is for this reason that many freelancers, especially those who are just starting out, often go without it.
More than anything else, the freelancer who wishes to become rich must become a master at managing their money, and this mastery should begin while one is still an employee, before they even make the transition into becoming self employed. By the time the freelancer is ready to make the transition from the self employed to the investor, they should have the maximum amount of financial assets under their control.