Working for yourself is a powerful feeling. You get to pursue what you're passionate about, on your own time. You create your own schedule, choose your own projects and determine your own workload. For many, it's the ultimate career goal.
But self-employment has its challenges. From lack of stability to pricy health insurance packages, there are many cons that dissuade people from following their dreams. Don't let this happen to you. Here's everything you need to know about working for yourself.
Since you're not on any company's payroll, your earnings won't be immediately taxed. In other words, it's your responsibility to file for taxes, which can feel overwhelming – especially if you haven't been setting aside a percentage of your profits in preparation.
As a self-employed individual, you must pay a self-employment tax on top of your regular income tax, which accounts for the Social Security and Medicare tax an employer would normally cover. You might also need to pay estimated taxes on a quarterly basis.
If you track your taxes year-round, you shouldn't have many issues when filing. Business News Daily recommends QuickBooks as the best accounting software for small businesses overall and Zoho Books as the best accounting software for microbusinesses (sole proprietors, freelancers, consultants, etc.). For more suggestions and software reviews, visit our best picks list.
For more information, check out our self-employment tax guide.
Your full-time day job likely offered benefits like 401(k) and health insurance, and losing those perks might feel overwhelming. However, there are options specifically for self-employed individuals.
Your retirement savings from your old employer's plan can roll over to an individual account with ease. The main concern is that your contributions will no longer be matched, as they likely were at your company.
As for health insurance, there are various plans geared for self-employed workers, although some of them may be expensive if you want decent coverage. Do research about the nature of your business and the packages available to you. For instance, freelancers can sign up with the Freelancer's Union to purchase insurance and other benefits.
When you're your own employer, you might lack the stability you had being part of payroll. However, self-employment is not that much riskier than a corporate job: If you work for a large company, you could still be laid off. Once you accept that you, along with everyone in this world, will never truly reach a state of stability in the business world, you'll be more willing and confident to pursue your passions.
You can, however, make it easier on yourself by ensuring you have enough work, a solid plan and income, and decent amount of savings before taking the leap into self-employment. Organizing all the details ahead of time will prevent panic and ease uncertainty.
Achieving work-life balance
When you work for yourself, it's easy to take on too many responsibilities and gigs. Without even realizing, you can end up working more hours than you did at your full-time job.
Make sure you're taking weekends off (for the most part), and setting reasonable limits for the hours you work each week.
Work-life balance is crucial if you want to be self-employed. Only assume projects that excite you, and don't accept every offer you're given. You know what you deserve, and if a client isn't willing to give you that, find another.
Additionally, don't work fully from home. Your home is supposed to be your haven, and if you spend every second of work in your living room or at your kitchen table, it might soon become a place you associate with stress and labor.
Instead, drive to a coffee shop or coworking space to get your work done. That way, you'll also be able to focus better without thinking about all the chores you need to do or the shows you want to watch.
The most important thing is to find a balance that works for you. Transitioning from a full-time gig to self-employment can be terrifying; but it's worth it to be able to craft the career and lifestyle you want.