The financial well-being of the self-employed

By Sébastien LaRochelle-Côté and Sharanjit Uppal

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The median household income of the self-employed as a group was 81% that of paid employees in 2009. However, income levels varied across self-employment categories. By most measures, the self-employed owners of incorporated businesses reported a larger household income than paid employees, while the unincorporated had a lower median income.

Because the personal finances of the self-employed often interact with business finances, it is important to examine other indicators of financial well-being, including wealth accumulation.

The self-employed were wealthier than paid employees. At $520,000, the median net worth of the self-employed—the difference between household assets and liabilities—was 2.7 times that of paid employees ($195,000). The self-employed not only reported higher levels of business assets, but also higher tangible assets.

With greater wealth to manage, the self-employed were more likely to be knowledgeable about finances, having had more correct answers, on average, to a series of questions used to gauge financial capability.

Although fewer of the self-employed reported that they were financially preparing for retirement, the majority (about 75%) were fairly or very confident that their retirement income would be sufficient to maintain their living standards. This compared to a figure of 69% among paid employees.

At equal income levels, household spending differed little between paid workers and the self-employed.