The Real Truth About Working for Yourself
Have you ever fantasized about quitting your job and working for yourself? Maybe you just had a baby and thought becoming a freelance photographer or writer would give you more time with your little one. Maybe Uber or Doordash seem really easy and flexible? Since changing careers is a big decision, ensure that you know what you’re getting into before taking the leap. Working for yourself is often a lot less glamorous and a lot more complicated than you might expect. It doesn’t necessarily mean unlimited time, plenty of money, and it definitely doesn’t mean a stress-free life. That doesn’t mean you should give up your dream of working for yourself! You just need to carefully consider the pros and cons before embarking on your goal of self-employment. Consider What You’re Giving Up Think about what you’re giving up when you quit a traditional job. Can you afford to lose the benefits listed below? Do you have a plan to compensate for these losses?
Regular Paycheck and Hours:
In a traditional job, you have regular hours and a steady, consistent paycheck. On the other hand, getting a new business off the ground is extremely challenging as your hours and income are inconsistent. Sometimes, you’ll make more money than you expected. At other times, it may feel like you’re barely getting by.
Some businesses take longer to succeed than others, and some businesses are seasonal. look into the seasonality of your industry, and set realistic expectations about how long it will take to earn the same income you’re making in your current job.If you’re interested in gig work, dig into the real numbers. Just because they advertise “regular” work doesn’t mean you’ll get gigs as often as you need them. At the same time, investigate the pay structure of the work. Even if the pay per hour seems excellent, is there backend work that you aren’t considering? What about downtime? Travel time? Prep time?
Health insurance is a high cost that’s usually a shared cost with your employer. Before you start working for yourself, do you have a plan for your family’s healthcare? In addition to monthly payments, many plans for the self-employed kick in only after you meet a specific deductible. Prescriptions are full price until deductible is met. Does your family need medications that would be full price? How much do they cost?
If your self-employed healthcare costs are too high, one option is to work part-time at your current job or in another position simply for benefits.
Paid Vacation and Sick Time
Employers give you paid vacation and paid sick time. You might think that working for yourself means working when you want. - italso means that when you aren’t working, you aren’t getting paid. So when you’re self-employed, you’ll have to calculate vacation and sick time into your cost of doing business.
It’s also essential to plan for potential emergencies or extended leaves of absence. The Family and Medical Leave Act is only for employees, not business owners. What would happen if you needed surgery and had to take two months to recover? Who would manage your business? How would you make enough money to pay yourself, support your business, and cover healthcare costs?
Are you planning to have a baby? Parental Leave when you’re self-employed is much more complicated. Currently, only five states offer paid Parental Leave programs for the self-employed. To participate, you must opt-in and decipher complex policies and eligibility requirements. You can also sign up for disability insurance, but policies often change, and maternity leave isn’t always covered.
To overcome these obstacles, prepare in advance. Save for a rainy day. What would happen if you couldn’t work and had to close shop for three months? Six months?
Does your company currently have a retirement plan or match 401(k)? If you go into business for yourself, you become the company. What happens to your current retirement plan? Look into IRAs, and self-employed 401(k)s. Ask your accountant for advice. Yes, you need an accountant if you decide to work for yourself!
Discounted childcare? Pet insurance? Tuition reimbursement? There are many other benefits a large company may offer that could cost you a lot of money as a business owners. Are these benefits you need? If so, calculate the cost beforehand.
Think about additional benefits you’ll lose, how much you need them, and what you can do to compensate for these lost benefits once you’re self-employed. Additional Self-Employment Considerations After evaluating what you stand to lose, there are a few other factors to consider before starting your own business or dedicating your time to gig work. Self-Employment Tax
Did you know that your company pays a portion of your taxes for you? Unfortunately, small businesses don’t have that luxury, so the self-employed must pay a higher percentage of their income on taxes than employees working for a company.
You’ll also have to pay into Social Security and Medicare. And instead of taxes coming out of your paychecks throughout the year, you’ll estimate and pay quarterly taxes, which can get complicated. But, again, this is where an accountant comes in handy!
When you work for an employer, the employer covers business expenses like building rent, licenses, electricity, equipment, supplies, marketing expenses, etc. When you run your own business, these costs come out of your pocket. Sit down and calculate every expense, no matter how small. For example, will you need insurance for some of your equipment? How often do you expect to need repairs or replacements? How much will a professional website and business cards cost you? Will you need to hire contractors for website maintenance, copywriting, or other services?
If you’re looking into gig work, examine the actual costs. Will you need to use your car, computer, or other equipment? How will this impact your insurance? Are they going to pay for the wear and tear on your gear? Some countries have made gig workers official employees because companies were taking advantage of them. Gig work can be profitable and successful in some cases, but it’s essential to do thorough research first.
Final Thoughts There are many benefits to working for yourself, but glamorizing self-employment often causes us to overlook what we give up when we walk out on traditional work. So, if you’re interested in starting a business or pursuing gig work, go for it! Just don’t leap without fully understanding and planning for the ramifications. If you decide to go into work for yourself, know what the costs are and make sure you set yourself up for long-term success!
Jane Goodrich is an award-winning photographer whose underlying mission is to support and empower other photographers in reaching new levels of profitable success. With a background in business and marketing, vast industry experience running two successful photography businesses, and building The Photography Business brand, Jane is one of the most respected photographers in the industry when it comes to running a successful business. Jane took her knowledge and experience and poured it into Picsello – a business management software platform for photographers that will genuinely support photographers in setting their pricing, running their business effectively, and marketing and monetizing their services. In addition, we'll help photographers navigate the challenges and cut through the misinformation. Picsello launches in 2022.