Self-employment is a rising trend. An increasing number of people are turning their backs on regular 9-5 employment and turning self-employed. In fact, it is estimated that 42 million Americans will be self-employed by 2020.
But being self-employed and working from home is not without its challenges. Walking away from the security of working for an organization takes courage, and can be really exciting.
But if you are considering self-employment, are you sure you’re prepared for the culture shock?
Working from home is a completely different experience than working in an office and there are many things you need to think about when becoming self-employed. It can be easy to overlook some of them with the buzz of taking the leap.
But if you read this guide to eight things you need to know before becoming self-employed, you’ll feel much more prepared.
1. You’ll Need Space To Work
Firstly, you’re going to need a place to work.
Many self-employed people work from home. It makes sense. You already pay for your home, so why rent another space?
But working from home may need a bit of reorganization of your space.
It helps to have a dedicated work space, even in your house. This will help you make the distinction between work life and home life. So when you are sat at your desk, you’re at work.
It will also help you keep all your work supplies and paperwork in one place and prevent you from losing things.
Also, make sure your home internet connection is good enough for what you need. What might have been an adequate connection for your private use, may not make the grade for your work.
2. You Are the Team
If you have been working for an organization, you were probably part of a team. But if you’re going to become self-employed, you’ll be on your own.
That means there won’t be an IT department to call if you are having tech issues. There won’t be anyone to do your filing or tidy up after you, and there won’t be someone to pick up the slack if you are snowed under.
You also won’t have a team to help boost your morale when the going is tough. Which for some self-employed people can be a real challenge.
3. No One Will Sort Out Your Taxes
One of the most tasks associated with being self-employed is filing your own taxes.
You may have had all of your taxes taken care of if you worked for a larger company. But if you are self-employed, your taxes are your responsibility.
But don’t be too daunted! There is plenty of advice available online about your tax responsibilities that will help you estimate what you owe.
4. Self-Employment Needs Financial Planning
For many people, the greatest risk associated with self-employment is financial insecurity.
If you are used to a regular paycheck each month, becoming self-employed can be a bit of a shock to the system.
It’s unlikely your income will be that consistent, especially in the first few months. So you need to plan for this and budget accordingly.
Work out the minimum you need to make, and what your essential expenses will be, and always have a back-up plan. Make sure you won’t be overstretched when you first start out, there will be enough to worry about!
5. Saving Is a Must
Because your income and your tax are your responsibility, it is important that you put money aside for your tax bill.
Whether you factor it into your regular budgeting or set up a specific savings account, it is essential you save some money.
It can be very stressful if you receive a tax bill that you are unable to pay, and can be the reason why some small businesses fail in the first year.
If you know you will have busy periods when your income increases, make sure you put extra aside. This will take the pressure off during quieter times.
6. Insurance Is Your Responsibility
Unlike being employed by an organization, being your own boss doesn’t automatically come with benefits.
Things like health insurance, dental plans, life insurance, and earnings protection will be down to you to sort out.
If you are the main breadwinner in your family, then insurance is even more important, as anything that prevents you from working can be really serious.
Check out these tips for personal insurance to find out more.
7. Keep Your Contacts
If you are taking the leap into self-employment, there will be lots of things that you leave behind including your organization and your colleagues.
As we’ve already discussed, when you’re self-employed there’s a lot of things you have to start doing for yourself. There are some things that it is really helpful to take with you into self-employment, including your business contacts.
While it might feel like a relief to walk away from your old job, you should still try and leave on good terms. Becoming self-employed can be a risky venture, so you will need as many contacts as possible.
You never know when your old business contacts or old colleagues may come in useful in the future, whether as clients or just to ask advice. So keep hold of that contact list.
8. You Still Need a Schedule
Self-employment can offer you a lot more freedom than a conventional job. You don’t have to work 9-5 if it doesn’t suit you, and your time is your own to manage.
However, it can be easy to get distracted when you work at home. When you don’t have a manager or a team to coordinate your schedule with, it is easy for your working day to lose some structure.
Even if you are not arranging meetings you should still create a daily schedule and stick to it.
More Business Advice At Your Fingertips
So those are eight things you should know before you switch to self-employment.
You will need to be organized, manage your finances and your taxes, and take care of your own benefits. But hopefully it will reap rewards and you won’t look back.
If you found this guide useful, why not check out more of our business articles to help you stay ahead of the game.