IT Contracting Career
I don’t know how far on your IT Contracting Career has been going but you’ll still remember your first contract.
It‘s fantastic, isn‘t it?
That is, the day you get your first contract.
It‘s an amazing amount of money and more than double what you earned before as a permie.
You start doing your multiplications to see how long it would take you to become a millionaire and to see how long it would take you to save towards quitting contracting.
IT Contractor Profit
You subtract, of course, what you currently spend and you also multiply your rate by 50 to see how much you will earn annually.
If you were a £35,000 a year permie who had £28,000 after tax and who spent £25,000 a year, you would use that figure to do the subtraction.
If you are earning £400 a day and £2,000 a week that would mean that you earned £100,000 a year once you multiplied by 50.
Subtracting that £25,000 a year that you would spend that means you would have £75,000 left over.
You might also pay around 15% tax on the total which is £15,000 so that brings you down to £60,000 profit a year.
Get Out of IT Contracting
This means that in 17 years you would be a millionaire and could get out of the game completely.
Of course, you would invest some of your money in shares and property. That might bring it down to something like 13 years.
You are still a young man, or woman, when you go contracting, maybe 25. So, you would be a millionaire and out of the game by the time you are 38.
How Many IT Contractors Got Out?
That‘s what we all thought, isn‘t it?
I wonder how many of we contractors managed it?
I would hazard a guess at less than 1-in-20.
Time Off from IT Contracting Career
What you haven‘t taken into account is that there will be time off between contracts and that downturns will come along when you have no money coming in and you still have all those bills.
Also, if you spent £25,000 out of the £28,000 you got paid, after tax, as a permie, you are not going to continue to spend £25,000 a year if you are bringing in £85,000 a year after tax.
You are going to loosen the purse strings a bit. You’ll get a fancier car and house as well as fancier and more exotic holidays.
Investing in Shares
When you invest in shares and property you are most likely to do it when you have the money.
You tend to have the money when rates are rising during a boom in the economy.
You think that because shares and property have been rising for a while that they are now safe to buy into.
However, that is the worst time.
All booms end.
Stock Market Losses
So, just when you are out of work and spending any spare cash you have, your shares will be slumping in value and you will be a forced seller, at low prices, in order to feed yourself and your family and to pay your taxes and VAT.
Once your shares are all gone the only asset you have left is your property.
However, if you are a first time contractor you may have bought at the peak of the boom. Not only is the price falling but it is taking ages to sell property in a falling market.
If you have been contracting for a while you may have more equity in your property. However, you are still facing the same problem that the time taken to sell a property has climbed maybe to 6 months or more.
Also, as the years go by the difference between what you earn and what you would earn as a permie would have gone down as those who, like you, earned around £35,000 a year would start earning £40,000 then £50,000 then £60,000 a year and beyond.
They would have company cars, good pensions, six weeks holiday and maybe share options eventually. That’s while you are still on the bottom rung of the ladder as a contract developer.
I remember, when I got a contract once, being taken to meet the big, big boss on my first day of the contract.
I was most surprised to be introduced to a girl who was junior to me at Barclays Bank when we both worked there as permies.
Contractors with Old Skills
You are also much less likely to be trained as a contractor and to learn new skills.
Many contractors hit one downturn too many.
During downturns, companies hold back on new systems and start them, using completely new skills when the downturn is over.
It is often a new breed of first time contractor who has those skills.
Beached from IT Contractor Market
Many contractors are left floundering on the beach with old skills when a recovery comes and are not able to get work, competing with many other contractors with the old skills over fewer and fewer jobs that use those old skills.
Then you have no money and you are into your forties and fifties and are not able to get any contract work.
Your last chance is to go permie again. However, many employers are suspicious of a ex-contract developers in their forties and fifties.
Even if you do manage to get a permie job it may be at not much more than the £35,000 a year that you used to get. So, you have wasted all those years not building your career.
Of course, your IT Contracting career doesn‘t have to be like this but it does happen to many contractors.
Don’t expect your IT Contracting Career to last forever.
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