If you are disciplined becoming self-employed is a great way to take control of your income while also having a flexible schedule to be able to raise a family or simply take time to enjoy life.
I’ve been self-employed for almost a decade and it’s been a roller coaster ride, but it’s definitely worth it. I’ve learned a lot, I’ve played a lot of different roles, and today I’m sharing some things to remember when you’re self-employed for those who are thinking about jumping in head first or those who are testing the waters.
Don’t get too comfortable with any client
When you’re self-employed, you give up the ability to get comfortable in a position.
You’re not their employee, so they can fire you at any given moment without a valid reason and you may not qualify for unemployment while you’re trying to land your next income source.
You’ll hear many veterans warn newbies to “never put all of their eggs in one basket”.
While it is nice to have clients that you can work with for years always have a backup plan in case one morning you wake up to an email that says your services are no longer needed.
Now, there is an exception to this….a well-established emergency fund.
If you have at least six months of living expenses available in an emergency fund feel free to get a little more comfortable with a presumably long-term client. This way you maintain financial stability without spreading yourself too thin and if they do decide they no longer want you on their team you have half a year to land another full-time client or piece together multiple clients to meet your income goals.
Set money aside for taxes each month
Taxes can be a real pain in the butt if you aren’t prepared when the new year comes around.
AND don’t think that you’re going to skip out on Uncle Sam. Your payment processor is going to automatically send the IRS a copy of your 1099 (unless you plan on making less than $15,000 in a year).
Even worst, if you don’t pay your estimated taxes, you get a penalty. The good news is that if you don’t want to pay quarterly you can pay all at once in December and still avoid that penalty. Then, of course, if you don’t file on time you also get a penalty.
AND don’t forget about your state taxes. You also want to file and pay those on time or that’s another penalty.
During my first-year of being self-employed I was clueless about the penalties for not paying estimated taxes and it was an unpleasant surprise when I filed. Then, I also didn’t think I needed to do state taxes since I was classified as an independent contractor and not a business… wrong again and another penalty.
Long story short, if you would like to not pay the government an additional $1000 or so in penalties file your taxes as soon as you get your 1099s and make sure that you pay before April 15th. In the event that you can’t pay by then call and set up a payment plan and then pay that off earlier than projected, if possible, to avoid all the interest that adds up.
See Also: Tips For Filing Taxes When Self Employed
You are going to need to consciously factor in healthcare expenses
Just like with taxes, you’re also solely responsible for your healthcare. Thankfully, now, for those who hardly get sick, you won’t get penalized for not having health insurance. However, if you do have medical issues you’re going to be 100% responsible for paying for your health insurance.
There are a ton of health insurance options for you to consider so make sure that you carefully review a handful of health insurance quotes before you decide which option makes the best sense for you.
Alternatively, if your partner gets health insurance through their job there’s always the option of being added on to their plan there and paying for your portion or some doctors have flat rates that they charge monthly, which often times can be cheaper than paying for health insurance monthly.
You just have to figure out what will work best for you because you never know when you may need to see a doctor.
You don’t have to say yes to everything
When first starting out it can be tempting to say yes to every single assignment that comes your way. However, when you’re the “yes” person you’ll find yourself in a similar situation to those who work traditional 9 to 5 jobs – you’ll hate what you do.
By turning down work that doesn’t appeal to you or will cause your hourly rate to go down, you’ll leave room for more enjoyable assignments.
Going back to what I said earlier – this is when that emergency fund comes into play as well.
Overall, keep in mind the reason that you wanted to become self employed in the first place. I’m sure it wasn’t for you to do work that you hated or still feel like you’re living paycheck to paycheck.
It’s easier when you focus on your passion
Continuing on from the last point…self employment will be so much more enjoyable when you focus on things that you’re passionate about.
For example, do you like writing – consider becoming a freelance writer. Maybe you’re someone who likes helping people stay organized and multitasking – virtual assistant work could be ideal for you.
Basically, whatever it is that you’re passionate about, you can be sure that there are quite a few people out there who are looking to hire someone to do just that. Turn your passion into a full time income.
You will always have people discouraging you
Despite working from home for almost a decade, I still have people telling me that ‘I need to get a real job’.
Mind you, my bills are always paid early, my kids have everything they need, and my flexible schedule allows me to be a more present parent. We won’t even talk about how my ‘not real job’ has allowed me to help some people out of some tight situations.
So my best advice to those who are thinking about starting the self employment journey is to not let others discourage you about working for yourself. Majority of the time it boils down to them being jealous that you have the discipline to make a full time living doing something that you’re passionate about or they’re trying to project their own fears on you.
Either way, let what they have to say go in one ear and out the other.
Self employment could be the best thing for you
I’m in no way saying that being self employed is easy.
It takes time to build up a client base, a recurring income, and the ability to be able to have a truly flexible schedule. However, as long as you remember these things I’ve discussed today I have no doubt that you can have a successful self-employment journey.