When you make the transition into self-employment, you become the sales, marketing, and accounting departments all rolled into one person. There are a lot of skills you need to learn as a new self-employed business owner. But there are benefits too: you can work from anywhere, have flexible working hours, and be your own boss.
If you’re thinking about becoming self-employed, consider these tips from people who have successfully taken the plunge:
Plan Financially Before Diving In
Planning ahead is essential when transitioning into self-employment. For starters, your total income will initially go down and cash flow will become irregular. Trent Hamm, founder of The Simple Dollar and freelance writer, went from receiving an identical paycheck every two weeks, to receiving irregular amounts on an irregular schedule. Not to mention the fact that there was no longer a company contributing to his taxes or retirement. Becoming self-employed cost him more than he thought.
You have to start saving for the best financial stability possible. Trent suggests keeping plenty of room in your checking account, starting a large emergency fund, and saving 25-50% of your income for taxes.
Get Out of Your House
People think self-employment offers a lot of freedom—and they’re right—but it comes at a cost. Life outside of an office can lonely and distracting. “Rolling out of bed every morning and walking the 10 feet to a desk in your apartment gets old pretty quickly,” Simon Owens, a content and social media consultant, says. He remembers going days on end without leaving his home or speaking to another person.
Simon stayed energized and focused by going out. You can do the same by meeting colleagues for lunch or coffee to break up the day. Or try joining a coworking space so you have somewhere to work that’s not 10 feet from your bed.
Take Advantage of Tax Write Offs
Jennifer Dunn, a former freelance writer and current tax expert, emphasizes that you will owe more taxes when you are self-employed. Without a company paying half of your taxes and a payroll service withholding taxes each paycheck, taxes are your sole responsibility and you need to pay them each quarter. However, self-employment also means you have more opportunities for tax write-offs.
Making sure you take advantage of tax write-offs is a must, according to Jennifer. Your Individual Retirement Account (IRA), business use of your home, and automobile expenses are just a few of the tax write-offs you can benefit from. She also advises saving detailed records of every transaction to maximize your returns and to ensure preparedness for audits.
“When you are self-employed (or striving to be), ‘time is money’ is never going to be a truer statement to you,” Christina Tiplea says. Christina has been a freelance writer and marketer for nearly five years and knows what it takes to be self-employed. She reminds us that time wasted at work is a wasted opportunity to make money.
In Christina’s view, you need become a master at working smarter, not harder. Every second is that much more valuable when you are self-employed. Try making the most of your mornings (the time of day with the least distraction) and breaking your tasks into more digestible chunks to become more productive. Also, utilize all the tools that technology has to offer for freelancers when it comes to accurate project management, from time tracking to invoicing, accountability, and flexibility.
Look for Little Wins
Success doesn’t happen in a day and your business won’t go viral overnight. But that doesn’t mean you aren’t winning. Ed Gandia, a business coach for freelancers, knows a thing or two about finding success with self-employment. He wants you to look for little wins along your journey to stay motivated and keep your confidence up. Avoid the trap of comparing yourself to others—no one’s journey is the same.
Learning to be a better self-promoter, attending a networking event, or taking a business class can all be considered quick wins. Like Ed says, “These wins don’t have to be monumental; they just have to be good enough to show you that you can do this.”
Self-employment needs a lot of consideration—it is a vastly different world. Take these lessons to heart and begin preparing for your transition into becoming your own boss.