Jonny makes more money working for someone else!
30 Jul, 2023
This is an update on my blog post: We now work just two days a week! In the previous blog post, I talked about Jonny transitioning from being self-employed to working for someone else. The burning question is, does he make more money working for himself or someone else?
Many people aspire to work for themselves, but is it really all that it’s cracked up to be, and is it as financially rewarding as all the stories we see on CNBC Make It?
In 2022, Jonny and I wrestled with the concept of him going to work for someone else as an employee. Given that many New Zealanders work for themselves or desire to, there is the misconception that you make more money and have more freedom when you work for yourself, and while this can certainly be true, it is not always the case.
Working for someone else guarantees you a pay cheque, whereas when you work for yourself, there are no guarantees. Jonny has worked as a Graphic Designer for his entire career. He has worked for others, as a business owner or, more recently, solo and self-employed. Since moving to Central Otago about eleven years ago, he continued to work solo and has never worked set hours; they have always been all over the place, aka flexible, which was great in many ways. His clients loved him because he always fitted in with their timeframes without question. The school run was easy. Fitting in exercise and stopping for a cuppa when someone turned up was easy.
However, when we reflected on it, he was at his computer an awful lot on any given day of the week, including weekends. He worked part-time, but his hours were weird, often heading back to his computer when the whānau went to bed at night. He always seemed busy, with some boom and bust periods to keep him on his toes, but he was increasingly unhappy with the chaotic structure of his days. The downtime was hard to enjoy because it was unpredictable. And the unpredictability was entirely his own because he got to set his agenda. Given that his office was in our living room, I was also sick of seeing him staring at a screen and hearing his mouse's incessant “click”. Anyone in a relationship with a graphic designer will know exactly what I mean!
When you work for yourself, alongside unusual hours, there is always a lot of non-chargeable time that you can’t invoice clients, such as client invoicing, finding new clients, learning new software etc. There was an ever-growing list of outgoings taking their slice of his income, too: ACC levies, taxes, computer upgrades, software subscriptions, accountant fees, office consumables, electricity and telecommunication bills, etc.
His business accounts were separate from ours, and once a month, he would transfer a set amount of money into our personal accounts. Therefore, what he earned, as in the amount of money we could spend on our household, was very easy for me to monitor in PocketSmith (if you are new to my blog, this is the budgeting app I use). After he had set aside money for his many expenses, I could easily calculate that he paid us $550 a week on average.
Late last year, we reached a turning point. Should Jonny continue in this fashion, or should he just close up his business and go and work for someone else?
Decision-making ultimately boiled down to one easy question: Was he making money?
The answer was no. When we began to pay attention to the hours he was working, the income was too low for the time spent at his computer. He was doing a lot for little in return.
I am always encouraging others to track what they earn and what they spend because the data they accumulate will be useful at some point. The fact that we could see exactly how much money he contributed to the family pot left no room for an argument (not that we argue). We decided that the money he earned was not fair compensation for the mahi he was putting in:
Jonny’s take home income for one year.
While he could have increased his hourly rate, worked smarter, worked longer hours and had better time management, it was simply time for a change. My earlier blog goes into this in more detail.
He began winding up his freelance business and, in late January 2023, began working from home in Alexandra as a Graphic Designer for a Christchurch company. He works Tuesday and Thursday from 8 - 5 and earns $620 weekly after tax, plus 3% KiwiSaver. We only spend $500 of this because while he is wrapping up all his self-employed stuff, he is holding money back for final tax bills, etc. Even though we are now at the end of July, this is still ongoing. We are cautious about that, probably holding back more money than we need, but we want to be prepared for unexpected bills. But once that is done, he will bring that entire income home.
Six months into this new way of working, I can confirm that the switch was financially and personally worth it.
It is excellent.
Without a doubt, he is making more money working for someone else.
This is the most stable our incomes have been in the last 20 years! We have guaranteed income because we both have part-time jobs (I also work two days a week) and are paid on Mondays. Our blog's income also pays us a small set amount each Monday. For the first time in a long time, we will have a minimum of $1,100 weekly. I budget based on this minimum income; it’s enough to cover all our needs, and when we earn money above that amount, I budget that, too. With no mortgage to service and no debts to pay, this is enough to live and invest.
So, Monday is definitely payday! I’d gotten so used to budgeting with an irregular income that it was no bother, but I have to say that getting paid weekly is pretty easy to get used to! Of course, we could both get sacked tomorrow, but the chances are low, and if it did happen, I have little doubt we could find another job.
The most significant change is that Jonny has got his time back, the most precious commodity of all.
Working for someone else is black and white. You work the hours they ask and pay you for your time. There are no taxes for us to sort. No equipment to buy. There are no accountants to pay. The after-tax income that arrives in our bank account is ours to manage. So easy!
His five days off are now his own, and while he is still working out how to fill them meaningfully, having those clear boundaries between work and leisure is really missing when you work for yourself. I’m pleased to say that he has also removed his office from our living room, making a clearer distinction between work and non-work.
The only way we could have been so conclusive about this being the right move was because we have tracked our income and outgoings for years. If many people who work for themselves were to do this, they too would likely work out that they earn less when they work for themselves. When you run your own business, there are a lot of grey areas when it comes to earning and spending, and I think we can close our eyes to the fact that we believe we are making money by “running things through the business” when we are not.
When I looked into our numbers in PocketSmith, I saw that working for himself was not paying for itself. The sooner he can completely wrap up the final tax bills, the sooner he can end that chapter of his working life. What it has also meant for me as the household CFO is that instead of his business paying for certain things, such as his phone plan etc., now those costs will be handled by our personal budgets, so there is a bit of adjusting going on there as I watch our monthly spending increase to pay for these. But these are known costs, and I have simply increased the budgeted amount in PocketSmith.
Here we go again.
There is also a fresh challenge that we face. We also run The Happy Saver together, which has grown organically over the years. It generates unpredictable income and is considered a business. Oh no, another business! Thankfully, I can also track the incomings and outgoings of The Happy Saver within PocketSmith. The blog has its bank accounts, so I can easily keep it separate from our personal finances and categorise every transaction so I can keep our accountant happy.
I track all of its incomings and outgoings very closely and have quickly realised the vast majority of what I do (answering emails) creates zero income. But the software I use and the income I do generate from writing, Phone A Friends and affiliate income create many expenses: website hosting, software subscriptions, PO Box, ACC, and tax, to name just a few, which means that now the blog has to make a certain amount of money to cover all of my monthly outgoings. Sigh.
One of the first things people always ask me about my blog is, “Do you make money out of it?” The answer is yes, and I’ve always declared every single cent to the IRD, but I never set this up as a money-making venture; it was and still is a “helping venture”. It’s the worst business model ever because I never set out to start my own business, and I’ve always said that if it makes money, that is a fantastic bonus. Having to run my own business does chill the vibe somewhat, I have to say.
But I did not intend it to cost me money either; I’m happy for it to cost my time, and I give countless hours of that every day, but the reality is that it costs us more and more to run. When I received my first ACC bill, I thought it was a mistake! But ever since, the bills keep coming.
I love blogging and helping people, but now that our blogging hobby has become a business, you can be sure that we will be keeping a tight rein on any spending to ensure that any income we make is commensurate with the mahi I put in, within reason. Whereas Jonny’s self-employment had run its course and was not economically viable, the blog is proving viable for now.
Slow work produces fine goods.
For now, it all works. The blog has gently grown over time, and both Jonny and I enjoy the work we are doing to continue creating content that people seem to want. We are not going anywhere for now, but I’m all over the numbers on this one, which means I’ll react quickly if I ever see a reason to change. Life is funny; every decision we make has consequences, but sometimes, it takes a while for them to show themselves. It turns out I’m a business owner! Who knew?
