Sometimes becoming self-employed is the only path available if you want to follow your dreams. This can be an excellent way to get the most out of a job while also having more freedom to do as you please from day-to-day.
However, while being self-employed definitely has its benefits, it also comes with its share of risks. While these shouldn’t put you off doing what you believe is best for you, it’s important to keep them in mind on your new venture. Otherwise, you might be in for a few unpleasant surprises somewhere down the line.
Just be sure to consider these four things before starting your self-employment journey.
Invest In Your Business
You can face challenges at any point when you’re self-employed. However, the most difficult period of your new venture typically comes at the beginning. After all, you’re on your own and trying to make a name for yourself in a crowded marketplace.
Self-employed businesses either sink or swim in those early months. To ensure you are a swimmer, you need to be active in publicizing yourself. That means spreading the word as much as possible, doing almost whatever it takes to ensure your venture is what people are talking about.
However, it also means putting a lot of effort into your online materials. As tempting as it might be, don’t try to cut corners when developing your website or establishing online marketing campaigns. It’s worth utilizing these tactics, even if they cost you a bit more money because they’ll help you to stand out. That could ultimately be what gets your self-employed business off the ground and ensure you make up all the money you spent, and then some.
Establish A Retirement Plan
One of the perks that typically comes with standard employment is a retirement fund. Every month, contributions are put in here, which you can then take advantage of once you hit the right age.
Unfortunately, you don’t have this when you’re self-employed, although that doesn’t mean you can’t set up your own retirement fund. It’s simple enough to do, although, with several options available, you’ll need to work out which one is best for you. Setting up a retirement plan can help your assets grow “tax-deferred” but also provide some legal protection and other benefits.
Generally speaking, there are two basic categories: self-employed defined benefit plan and defined contribution plans like IRA’s, 401k’s, etc. Defined contribution plans, by definition, focus on how much you can contribute today and do not provide any guarantees for future income. Therefore, the risks primarily fall on the employee. Defined Benefit plans define a future income level and then backtrack to determine how much the employer must fund each year to satisfy the income guarantees for all employees.
This may not be a consideration at first as you are just getting started but can be a significant consideration if the business becomes very profitable. Once your business is generating more income than you need to withdraw personally, defined benefit plans can allocate the majority of benefits to the owner resulting in significant tax savings by allowing you to pay yourself less but contribute more to your retirement.
Be Smart About Scheduling
Plenty of people create a self-employed business hoping that they’ll get to work when they want, relax more often, and still make tons of money. Unfortunately, most ventures don’t typically work out that way. One business owner put it this way, “People believe that being self-employed means I only have to work half a day, I say yes and I get to choose which 12 hours it is too.”
Before you go down the self-employed route, an important thing to remember is that work is unlikely to be constant throughout the year. Demand may be inconsistent, which means you might be rushed off your feet in the lead up to Christmas, and then barely get anything for several months after. Income can be erratic, so you need to be self-disciplined and dedicated if you want to be successful.
Do some research and see if your area of work commonly has busier and quieter periods. If so, try to make the most of the former so you don’t have to worry about money during the latter. Don’t think you can just rest on your laurels when things get quiet, though. This downtime is the perfect opportunity to improve your online presence, enhance your skills, and ensure that you’re fully prepared for when the work picks up again.
Stay On Top Of Your Taxes
Taxes are a necessary evil, and unfortunately, they’re something you have to think about a lot when you’re self-employed. They aren’t just automatically deducted when you’re your own boss because filing them is your responsibility.
Hiring an accountant or bookkeeping service to do this for you, will ensure everything is done correctly and allow you to focus more of your time and energy on generating sales and attaining profitability.
If you’re unhappy as an employee, it might be worth becoming the boss of your own business. Just remember that financial security isn’t always assured on this path, so it’s important to consider these key points to ensure you’re protected.
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