08 Mar Considering Self-employment?
You’ve dreamed about it for years. No more meetings, performance reviews, clocking in or out. The opportunity to create your own schedule and even spend more time with your family. Finally, your moment to transition from employed to self-employed is here.
Taking the plunge into a more independent method of earning a living can be very rewarding. Some choose a path to open their own business, while others are ready to explore a role as a freelancer or independent consultant. They’re all following the promise of more freedom, flexibility and a greater variety of work that brings personal fulfillment. And when you add in the possibility of increasing your income, what’s not to love?
The truth is, more than you think. With all that freedom comes responsibility and self-discipline. You still need a steady income to provide for yourself and your family. When you work for yourself, there’s a lot of uncertainty. Will you have a consistent flow of work or business? Will you have to reduce your hourly rate to get additional work?
What about benefits? There’s no more paid time off for holidays and vacation, retirement matching or company bonuses. Health insurance is now completely in your court and you’ll also be responsible for paying your own taxes each year.
Self-employment can also mean trying to keep up with customer requests – some on the same-day or weekend – and actively managing those relationships. This can lead to long workdays, odd hours and stress. Do that long enough and you’ll burn out.
The good news is that it’s all perfectly obtainable – if you prepare. Taking the time to talk with others who’ve been down this road, set a blueprint, and envision what success looks like are key. Here are some ideas to get you thinking about the journey to self-employment.
Build a plan. We’re not talking about a few ideas. You should visualize every aspect of what your new venture will look like. Look at the type and amount of work you’ll take on, how you’ll create work-life balance, and what you’ll do when problems arise. You’ll also want to assess your skills and be prepared to learn more. And determine how much potential your business could have. Where do you want it to go?
Start out slow. Take what you’re doing now and try it as a freelancer. Create a side hustle in addition to your current role to get used to the challenges. This will teach you about the ebb and flow of workload, working with clients and the unexpected.
Manage money wisely. You should start by saving three to six months of salary for an emergency fund. This is your backup when business is slow, plus it gives you peace of mind the rest of the time. In addition, taxes won’t be withheld from your income, so you’ll need to put money aside to cover them. One strategy for making this more manageable is to pay your taxes quarterly to lesson the blow each year on tax day.
Explore tax deductions. Will you need to purchase office supplies, a computer or equipment to do your job? Take the time to look at all your options for tax deductions. Maybe you’ll be driving to client meetings and can write off mileage and meals. Just make sure to keep a record and receipts of your activity.
Often, people don’t realize they may be able to deduct the cost of health insurance premiums for their family. Plus, if your business is located in your home or apartment, you could possibly deduct a number of related expenses.
According to the IRS, “Deductible expenses for business use of your home include the business portion of real estate taxes, mortgage interest, rent, casualty losses, utilities, insurance, depreciation, maintenance, and repairs.”
Prioritize marketing. Getting the word out about what you do is everything. You need to let your target customers know you exist, not just through advertising and promotion but by building relationships. Attend networking events, join local clubs and grab coffee with leaders who employee people who do what you do. These relationships are also key to your well-being because they counter-balance the solitary nature of self-employment.
Create a schedule. Having an organized schedule – along with a routine – creates good habits, peace of mind and work-life balance. All which are key to running a healthy business. Set limits on how long you’ll work and give yourself goals and rewards to avoid procrastination. You shouldn’t have to work all day and night, but you don’t want empty space filling up your day either.
Making the move to self-employment is a life-changing event that requires careful consideration and preparation before making a commitment. However, with a little work, it can be incredibly exciting and possibly the best decision you’ll ever make.
Sources
www.expensivity.com/guide-to-self-employment-success/
www.foxbusiness.com/money/employed-to-self-employed
Topic no. 509, Business use of home | Internal Revenue Service (irs.gov)