Friday, June 12, 2015

Self-employed – To your advantage or not?

In my large network and circle of friends, I know people who are
salaried as well as some who are self-employed. There are positives
and negatives to both so I will discuss how each affects your family
life and also your ability to get financing.
Let's face it....finding a job in today's economy is extremely tough
and competitive. Many graduates are leaving university with great
grades and promise, only to be disappointed by little opportunity
and/or little pay. Should you be employed, there is a risk that you
get replaced by someone who will work for less, or worse, a computer
program.

In terms of financing though, banks prefer salaried people over
self-employed people. They see you as less likely to default on
your mortgage, since you receive a consistent pay cheque every two
weeks. In terms of family life, it gives you the peace of mind that
you can budget your expenses. On the other hand, it gives you little
flexibility when it comes to family time. You have your weekends free,
but if you want to take a Friday off because your son is sick, you
don't have that same flexibility.

As tough as it is to find a job in today's economy, starting your own
business isn't much easier. It usually takes a strong financial
investment to start up. If you go into a field like real estate, you
usually need money to survive at the beginning. It takes time to grow
your client base and, while you pound the pavement to get your
commissions, you need savings to be able to feed your family. Life can
be stressful on a family waiting months for a commission cheque, so
unless your partner is salaried and bringing in good money, it can be
tough.

On a positive note, you can deduct expenses like your gas,
phone, Internet etc., which in turn can lower your net income, thus
lowering the taxes you have to pay the government. These expenses must
be legitimate, but this is a huge advantage. Another advantage is that you
are paying yourself first. If you make a real estate commission in
January 2012, you only have to pay taxes to the government in mid-
2013. If you are salaried and you get a $3,000 paycheque, you will
have about 50% deducted from that paycheque at source right away. You
have to budget for income taxes, true, but think about the advantage of
holding on to your money for an extra year and a half. Unfortunately,
banks have tightened their rules for mortgage financing for
self-employed individuals. These applicants pay higher insurance
premiums for their mortgages and their self-declared income is highly
scrutinized. In most cases, you also have to be self-employed for two
years.

My specialty is mortgages for self-employed individuals, so if you
have any questions, please don't hesitate to contact me.