Lounging in pajamas. Raiding the fridge. Having the time to do whatever you want. These are all the images that come to mind when it comes to self-employment. Of course, that’s not necessarily the reality. I’m actually making the jump to self-employment on January 1, and there are so many things to consider before I do so.
1. Health Insurance
I would never go without health insurance, especially because I plan on starting a family soon. Purchasing your own policy can get extremely pricey, so you’ll have to do your research. You can also hop on your spouses insurance if you have one, which is what I am planning to do. This is one of the main issues that holds people back from self-employment, so if you can get over this hump, you’re on the right track.
Self-employment comes with a variable income. It’s important to have a cushion for those months that don’t go as well as you planned. Depending on your field, this number may differ, but I’m planning on having a $5,000 cushion for those months that aren’t as great as the rest. It’s also important to think about vacation time and if you will be able to step away from your business at any point.
In addition to my regular savings account, I have a $1,000 emergency fund that I will use for issues like car repairs or medical expenses if necessary.
Everyone has a certain level of expenses when they own their own business. Every business is different, so if you are a DJ, you’re going to have a lot more expenses than a blogger. Since my job is a personal finance freelance writer, I only need my computer and web hosting. As my business grows, these expenses will likely increase, but for now, I have a very low overhead.
When I move to self employment, we are planning on being a one car family. Since I will be spending most of my time in my home, I won’t need the car as much. I can also drop my husband off at work on the days that I need to run errands. We still haven’t worked out what will happen in the case of an emergency, but if it seems like I will definitely need a car, we can purchase a second one that is more affordable.
If there is ever a need to to borrow a car, I would probably go to my family or a friend for help. Do you know that you can get short term car insurance for when borrowing a car from a friend/test driving a car/only needing a car for a few weeks in a year. You can get a one week car insurance from Insure 4 a Day. They specialize in providing motorists with the temporary car cover that they require, and their online system makes it easy to organize a policy in four simple steps. Forget contacting your broker or insurer when you need to arrange short term insurance in a hurry – they make it simple and straightforward to take out a policy with the minimum of fuss. This is a good and reasonable option as there is no need to sign a contract and pay upfront for 6 months or even 3 months. Its like a “Pay as you go” concept for car insurance.
In addition to the above financial concerns, it’s also important to evaluate if you are motivated enough to succeed at self-employment. With no boss looking over your work or asking you about deadlines, it can be difficult to stay motivated. My secret is getting up and getting dressed. Although lounging in my pajamas would be nice, feeling like I’m a professional and being ready to open the door if the UPS guy comes makes me feel a lot better about my day!
Have you ever considered being your own boss? What else would you consider before taking the leap towards self-employment?
Photo Credit: FreeDigitalPhotos.net