Many people today are pursuing independent work—freelancing, self-employment, and independent contracting—to develop their careers, build businesses, or pursue what they are passionate about. There are certainly many benefits to working independently, but one question that often arises is whether or not pursuing this do-it-yourself career track helps or hinders an individual’s ability to reach financial freedom.
Going independent is a significant career and life change requiring strategic planning, the ability to find and retain clients, patience, perseverance, and, of course, good financial planning. For those who do make the leap, how does their financial well-being compare to that of people who have traditional jobs?
To answer this question, MBO asked independent professionals questions the U.S. Consumer Financial Protection Bureau (CFPB) asks to build an individual’s financial well-being score. This allowed MBO to compare the financial well-being of different types of workers using a common metric. To dive further into our findings, check out:
It turns out that the financial well-being scores of independent workers are very similar to those with traditional jobs. For instance, the average score for independent workers is 54, and the average score for people with traditional jobs is 53. The average score reported by the CFPB for adult Americans was 54. Simply put, there is little difference in how independent workers and traditional job holders perceive their financial well-being.
While these scores are more or less the same for different worker types, there is a much wider variation of scores among independent workers themselves. For example, 27% of independent workers reported scores of 60-plus, versus only 22% of traditional job holders. Much of this variation is due to the fact that financial well-being scores correlate with income and there is a wide variation of income among independent workers. Some 3.14 million full-time independent workers earn more than $100,000 per year, while those who work independently occasionally or take on independent work to supplement a full-time job may be bringing in less than $25,000 per year from their independent job.
Further findings discovered that 30% of independent workers reported that they are doing “living comfortably,” while 47% said they are “doing okay,” and only 8% said they are “finding it difficult to get by.” Overall, MBO’s research showed that working independently is financially as viable as traditional employment for the majority of independent workers.
To read more about what we discovered, check out our research brief: The Financial Well-Being of Independent Workers.