When Does It Make Sense to Quit Your Job & Become a Consultant?
26th Nov 2019
If you’re thinking about quitting your corporate job, now is a prime time to harness your expertise and become a self-employed, independent consultant. A growing number of workers are leaving their day jobs for the opportunity to be in the saddle and earn high income. According to Bureau of Labor Statistics, about 16 million people in the the US are self-employed.
There are pros and cons of becoming a freelancer – and many are part of a tax strategy. At Dedicated DB, we help high income, self-employed clients reduce tax liabilities by making large retirement plan contributions. Based on the sixth annual “Freelancing in America” survey by the Freelancers Union and Upwork, almost 35% of the U.S. workforce freelancing. Plus,for every freelancer who believes their work situation is temporary, there’s another freelancer who sees it as a long-term career path.
Currently, the public perception of the gig economy centers on blue collar work and lower paid jobs such as Uber drivers and delivery services. However, research states that 59% of the gig economy are professional workers, such as consultants, and only 16% are shared ride drivers.
And according to Harvard Business Review, independent consultants are highly experienced and seasoned professionals. About 90% of them said it was their decision to start independent consulting,while 10% said they were forced to because they lost their job. About 90% of independent consultants say they are more satisified with their current career than those employed at a company. The independent consultants surveyed are highly experienced, with about 75% being the main or sole household wage earner.
Here are four strategies to help you transition from your corporate day job into an independent consultant or freelancer.
1. Find a full-time consulting job and spend all your time, efforts and strategies into building this new career. If you focus on full-time consulting, you will be committed to growing your business without distractions.
2. If you don’t want to jump into consulting full time, keep your corporate position and begin your consulting as a part-time endeavor. Over time you’ll gain experience in the role of consultant. This approach can be useful in helping you shift slowly and steadily from a corporate career. Many independent consultants use side gigs or part-time independent work to help them gradually get into self-employment, especially older workers who want to ease into retirement.
3. Another strategy to gain clients and independent work is to leverage your contacts from your jobs and professional network. In your previous roles, you’ve likely interacted with different types of people – ranging from vendors and partners to clients and customers.
4. Be careful not to burn bridges. It’s important to value the commitment you have made with your current employer. While you may be leaving your current job, don’t behave in unprofessional ways. Be sure to respect and value any non-disclosure agreements and abide by any rules you have agreed to with your employer.
We have several clients who worked corporate day jobs, but then ventured off on their own to become independent consultants or freelancers. One such client is a 48-year-old consultant from Atlanta, Georgia, who helps people with web development. He earns $300,000 a year as a consultant and was seeking a way to reducetaxes and save for retirement. The consultant opened a Defined Benefit plan with an estimated annual contribution of $92,300. As a result, he will have tax savings of $34,150. His projected accumulation at retirement is over $2.4 million.
Are you a high-earning independent consultant or freelancer who wants to lower your taxes and save for retirement? Get a free online estimate using our Defined Benefit plan calculator to see how much you can contribute and save.