Covid-19 teaches Americans how to ditch their steady paychecks

During the Covid-19 pandemic, millions of Americans have quit their jobs. Some retire early. Many are also becoming part of a growing force of mobility in the American economy: workers who have given up steady wages to become freelancers, solo operators, contractors, and more. coins and day traders.

According to the Labor Department, the number of unincorporated self-employed workers in the US reached 10 million in February, or 400,000 more than when the pandemic began. It spiked to 10.3 million last summer.

Those willing to give up paycheck security say there are risks and rewards and that certain strategies work best. They can follow their passions, work the hours they want, and improve their quality of life. They are able to do so, they say, because more savings are accumulated during the pandemic and a hot job market could act as a stepping stone should their solo path fail.

But some may find their savings negligible after a period of market turmoil that began earlier this year and accelerated when Russia invaded Ukraine. Rising inflation is also eating away at money accumulated since 2020, and a free life could make it more difficult to get a mortgage due to tight scrutiny by lenders. Giving up a steady paycheck doesn’t seem as financially attractive as it once did.

Lisa Camerlengo, 45, has experienced the same rewards and pitfalls of life. After nearly two decades at consulting firms, she quit her job full-time and founded her own media and brand strategy company last July. She says she’s saved money on clothes for work and commuting expenses, but her rent has increased by about $200 while food and gas costs have skyrocketed as well. She also said she now pays more for medical and dental insurance.

“It’s hard to save because the cost of living has definitely gone up,” said Ms Camerlengo, who lives in central New Jersey.

It’s not just self-employed people living without a steady paycheck now. According to the Labor Department, there are 4.2 million more people outside of the U.S. workforce — meaning they’re out of work and not looking for work — compared with pre-pandemic times. There are also 2.1 million fewer people on the company’s payroll. Those movements are exacerbating labor shortages in some industries; There are still more than 11 million open jobs that employers cannot fill.

The increase in the number of freelancers during the pandemic has made it more challenging for companies to fill their vacant positions.


Photo:

Joe Raedle / Getty Images

One person facing unexpected challenges after leaving the workforce is Wayne Low, 49, who has spent most of his career advising ultra-high net worth families and managing their properties. In early 2020, he began contemplating applying his skills to his own portfolio. He calculates that he has enough money to leave his job at Citigroup Inc.,

where he worked for 17 years. He left in June 2020.

“I realized this could be done if I cut my expenses a little bit,” he said.

He doesn’t miss 11 business days and says his portfolio has performed well enough despite the recent market turmoil. But he and his wife ran into trouble when they started looking for housing in the New York area so they could be closer to Mr. Low’s mother. Some landlords, Mr. Low said, don’t rent out because he doesn’t have a steady salary, and he’s been denied a number of mortgage applications despite saving up. In the end, he said, the couple could opt to buy a home right away in a less expensive part of the US.

“They want your fortune to be this weird number,” he said. “The financial system doesn’t know what to do with early retirees.”

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Malcolm Hollensteiner, head of mortgage production at Sandy Spring Bank in Maryland, said most mortgage lenders will require private borrowers to provide two-year tax returns to prove it. their consistency and reliability.

“Previous mortgage platforms considered self-employed borrowers to be more sophisticated borrowers and less likely borrowers to succeed, simply because of the nature of self-employment income,” he said.

Of course, the factors that encourage more people to move to the fringes of the labor market can pull them back into the traditional nine- to five-person working life.

Some Americans quit their jobs for better pay or because of challenges with childcare or other obstacles. But others have left because of excessive market returns, rising house prices and three separate stimulus tests that amounted to $1,200, $600 and $1,400 each. The personal savings rate – the percentage of households with disposable income falling each month – rose to an all-time high of 33.8% in April 2020 and remained up until last spring , according to Commerce Department data.

The American workforce is changing rapidly. In August, 4.3 million workers quit their jobs, part of what many called the “Major Resignation.” Here’s a look at where the workers are going and why. Artwork: Liz Ornitz / WSJ

But that rate has dropped – it fell to 6.4% in January – as market turmoil and inflation pose new challenges to nesting eggs. Michael Liersch, Head of Consulting and Planning at Wells Fargo,

says people going out on their own need to have a support system to act as a placard when times are tough. Ted Halpern, a financial planner in Ashburn, Va., says they need to pay off their high-interest credit card debt before leaving a paycheck. Joey Casolaro, a financial planner in Wayne, NJ, says they need to build up a cash reserve of at least three to six months for expenses.

“Have a safety net for leaner periods,” says Lindsey Swanson, a financial planner in Whitethorn, Calif.

Landon Taylor, a middle school teacher in Denton, Texas. He decided to resign at the end of the school year and take a year off.

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The number of sellers on Etsy skyrocketed during the pandemic.


Photo:

Gabby Jones / Bloomberg News

Mr. Taylor and his wife have accumulated savings — along with a few hundred dollars, which Mr. Taylor earns each month by leading a local band and helping a friend with the weekend pruning business — enough. to sustain their family for the whole year, he said. He plans to explore other options for making money, including renting an extra bedroom in their home and selling home appliances online.

“I felt it was an opportunity that I could give myself,” said 39-year-old Taylor. “How great would that be, if there was a steady income and I didn’t have to work five days a week and stress about working for someone else? “

Some companies are benefiting from all the new people willing to work without a consistent salary. Sellers on Etsy.com — an online marketplace focused on crafts that have attracted more interest during the pandemic — grow to 5.3 million by the end of 2021 from 2.5 million two years ago there. At LinkedIn, a new feature that helps users find short-term projects is appealing to self-employed people in marketing, design, engineering, as well as illustration and video editing, said Matt Faustman, team leader products at LinkedIn said. Subscriptions for marketing and design services have increased by more than 50% month-on-month since October 2021.

“We have a lot of people who think, ‘I can switch to freelance work completely or I can get a little more time because I don’t have to work — I’ll try my skills. me and apply them in a part-time way,” said Mr. Faustman.

Quitting a full-time job while keeping your finances intact takes some work. Grant Maddox learned this lesson when he started his own financial consulting firm in October after taking a salaried job at another. His company’s payments are mostly quarterly, prompting Mr. Maddox to carefully monitor his cash flow and stretch his dollars – knowing that his pay can fluctuate with the number of clients he has. he has.

“Without a doubt, the tension is there,” he said.

Maddox, 29, budgets a line item for his monthly expenses, such as groceries, to make sure he has enough at the end of each quarter. If he spends $500 in a month on groceries instead of the $600 he planned, he will move $100 into his savings account. If he goes over budget in one category, he will find ways to cut costs in other places, such as giving up on buying new clothes.

Anna McCorvey, 36, also prepped a few things before leaving her full-time job as an architect last summer: She saved about six months in costs. She now works part-time at a smaller company and a nonprofit called the River East Design Center, which she founded in Washington, DC.

After that, she adapted her life to a smaller income. She cooks at home, just subscribes to a streaming service, and does her own hair and nails. On Fridays, she’ll Google “free things to do near me this weekend” and maybe go for a local hike or visit a free museum exhibit. She can’t afford to eat out as much as she used to but she says the trade-off is worth it.

“Covid-19 has made me work harder in the pursuit of what pleases me,” Ms. McCorvey said.

Abby Regan, 42, also died after starting a part-time home physiotherapy business. Her increasing self-control came with a 90% reduction from what she had done in her previous physical therapy job, which she lost in May 2020. She has the opportunity. association applied to another website owned by her owner but declined.

Ms Regan, a mother of three in Melbourne, Fla, said: “I thought, ‘I don’t want to work for anyone anymore.

She and her husband decided to live mainly on his software engineer salary. The family saves enough on childcare costs to not make financial sacrifices, she said. “Now I know what it feels like to be 100% in control of my own time,” says Ms. Regan, who works around 10 hours a week.

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Leon Ondieki, with 1.6 million TikTok followers, has no plans to rely on salary. ‘I can’t see myself working for one company or for another.’


Photo:

Kendrick Brinson for The Wall Street Journal

Some say they found other ways to make a living even before starting their careers. Leon Ondieki, 19 years old, is studying management information systems at the University of Georgia. But for now, using it to get a paying job is a fallback, he said. Instead, he’s paying for college — and saving to buy a Tesla Model Y — by creating content for his 1.6 million TikTok followers.

Mr. Ondieki now spends more than 40 hours a week planning, filming, editing and posting his videos, in which he often jokes with passersby on campus or at shopping malls, placing Quiz questions or play quirky games with a small prize. He makes up to $30,000 a month, he says, through a combination of paid sponsorships from brands and the TikTok Creators Fund.

“I couldn’t see myself working for one company or for anyone else,” Mr. Ondieki said.

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