From July I'll be earning more than double of what I was making as a full time employee. This gives me a great opportunity to pay off my mortgage faster. I have to be much more financially careful than I'd been so far. Now, I've been given a clean start, a second chance I would say. 

I was a contractor for 17 years, I paid off one mortgage just to get divorce and lose the half of my wealth. In 2014 after the divorce, I found myself to be at the beginning with $230K mortgage. Back then I lived life without any control, neither emotional nor financial and of course I, Very quickly, went to debt. In 2016 and 2018 I had to re-finance my mortgage to pay off my debt.

But in the lockdown of 2020, I stabilized myself. The pandemic forced me not to go out and spend enormous amounts of money on dating, on drinks and dinners. In that period I have started to lower my mortgage significantly, and as it is now stands, it is bellow $150K. Now, as a contractor I have great opportunity to pay it off in two years. I just had to be smart and whenever I get paycheck, the one third of received money I have to put into mortgage.

Of course one third of every paycheck must be left for paying of taxes. As a full time employee I paid around 35% of income taxes but as a contractor I will be paying around 25%. You must wonder how is this possible. You see, as a contractor you are not paid directly, your company receives the money. Now if the company payroll is set to be once a year, on the end of fiscal year you set how much salary you want to be paid, for example 40K or 60K and you pay 35% income taxes on that amount. From the gross amount of your yearly income you claim the company's expenses like car maintenance, fuel you spend for business needs, cell phone bills, computer bills, internet etc. and on the amount what is left after this expenses and the employee salary you pay around 26% corporate income taxes.

It's great to be a contractor but you have to have a good health because you don't have any benefits what full time employees have, no medical insurance, no coverage for dentist etc. Also you don't have any pension plan, you're on your own. I would say it is your choice how to spend money, it's your preference of what you really need in life. And that's what I like of being a contractor.

So let see this in a real world example. For the same type of job, it is a huge difference of being a full time employee and a contractor. Full time employee may have $120 salary while a contractor will get $150K for the same position. As a full time employee you get medical benefits but you pay 35% (of course it is according to earning brackets but to simplify let say the average income tax is 35%) and you have expenses of $15K for car, and bills, so you get on the hands $65K. As a contractor if you earn $150K and you give yourself $40K salary and you claim $20K of expenses you pay total income tax of 40*0.35 + 90*0.26 around $27K which leaves $120K in your hands.

That's a good thing about being a contractor. However, at a working place from you will be expected much more than from full time employee. The employers look very closely in the contractor's hours, you have to be punctual, on time and serious in your work. You will not be called for department's meetings, for town hall meetings, for all day events etc. You also will not have any performance review, your review is the extension of your contract.

The employer will not pay you for any new learning or a course. You have to organize your life accordingly, you have to find a time, energy and willingness to always learn new things and be up to date with the services you're giving. In software development world that is very important.

And lets finish today's post with indication that vacation is not paid for the contractors. The full time employees have around 20 days of paid vacation while contractors have none. Having all this in mind it is up to everyone to chose between being a full time employee or a contractor.