It’s no secret that I am excited about self-employment and the world of freelancing. Just a couple of weeks ago, I published my post Pursuing What I Love or What Brings in the (Stable) Money. I loved all of the wonderful comments that everyone left me, and it really got me thinking.
Now that I’ve thrown myself out there, I need a plan. And I need to write that plan down or I will completely forget about it.
I know some may think that I am extremely naive for wanting to make the switch, but trust me, I have thought about this a lot. I’m ready to take the next step in my life.
Working for yourself is not all butterflies and beaches, and I realize that. Not everyone has good luck with it, and it doesn’t work out for everyone. Some regret the choice to switch to self-employment…
But some LOVE that they made the switch. There are positives and negatives of working for yourself, and also working for others.
For myself, I see more positives in working for myself rather than the other way around. I want to prepare myself as much as possible also.
Increase savings
This is my most important item on my to-do list. We definitely want to increase our savings before I make the switch. We want to be prepared just in case there is an absolutely horrible month of income.
I would also like to have very limited debt, or just no high interest debt. I’m fine with saving the money and not paying it off if the interest rate is 0%. Luckily right now our income is high and our expenses are relatively low.
Create a new budget
If I will be self-employed and W will be mostly commission at his job, then a new budget needs to be created. Every month will most likely have a much different income level and this all needs to be thought about. We definitely want to continue to live on less than half of our income as well.
I don’t want us to feel like we are struggling because we are stressed about not having any stable income.
Build your freelancing NOW
It is important to build up your freelancing before you decide to leave your day job. Of course this doesn’t always work perfectly for everyone, but this is how I’m approaching self-employment. I have a number in my head for where I would like to be with my freelancing income per month, and I would most definitely prefer to reach that before I make the switch.
I want to build up clients/customers to a point where I 100% believe that I can be successful as a self-employed person.
Health insurance
Health insurance will be very expensive, but luckily I’ll be able to hop onto W’s plan once we get married. Also, health insurance can vary widely. You can get a very cheap plan that pretty much will only be helpful when you are near death and after paying large fees, or you can get something more expensive that will require you to pay less when you visit the doctor.
For me (if I have to pay for my own insurance), since I am still young and never go to the doctor, I will most likely go for something on the cheaper side for monthly payments, and save a heck of a lot of money for any fees and co-payments in a separate medical fund.
Various expenses
For me, luckily I don’t need a lot of expensive machines to do my work. Just a computer and I will be fine. However, before I make the switch, I definitely need to upgrade to a better computer. The one I currently have is becoming more slow each day, and that is just not efficient when you are self-employed. I would also like to work on furnishing my own office area. Right now, I just work wherever.
Diversify your work
This doesn’t have to apply to everyone. However, for me, I would like to be as diversified as I can. This way, if something decreases with one of my jobs, then I will have other areas to fall back on. I am working on adding more side hustles all the time, and the other day added blog management to my list.
I know that most of my work is related to blogs, so I am looking for additional areas as well to expand in. What do YOU do for work?
Taxes – Don’t forget about these!
Many of you have asked me if I’m paying taxes. OF COURSE I am paying taxes. I should probably make a post on this as many of you have had questions about self-employment taxes. I am still new to paying these (outside of what I pay at my office job), as I just started working on my side hustles last year. It is no fun to have to pay them but it needs to be done. Taxes are paid quarterly and they are expensive.
Taxes need to be put into our budget as well, and I want to budget on the high side so that there are absolutely no surprises.
Loans will be harder to get approved for
It’s no secret, we are looking for a new house. We plan on buying sooner rather than later (before I make the switch), as I don’t have 2 full years of self-employment on the books. I would hate to make the switch and then not be able to get a home since neither of us have stable income. I know it is possible to get a home, but I’d rather get the best interest rate and also for the home buying process to be as easy as possible (just like the first time we bought a house).
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Awww thanks! I'm happy that no one has said that I am stupid haha
My recent post How To Prepare for Self-Employment
Hi Michelle, you are an inspiring young woman. It's refreshing to see how well you are planning, that's a big departure from what I hear from callers dialing in to Dave Ramsey's radio show! I have always wanted to be my own boss but it wasn't until I spent years recovering from my horrid money-management skills and built a decent asset base that I could be brave enough to make the plunge.
Unlike you, I didn't take the leap with an established income from "side hustles." Instead, I eliminated all debt including my mortgage, got my retirement nest egg to a decent level and saved up a hunk of cash to last me a year without income. So, here I am working on my own terms with the goal to help others and earn a living doing so. While I'm not earning yet…I love what I'm doing and never want to stop!
Thanks Ree! Seriously, you are too nice to me 🙂
And that's awesome that you love what you're doing. That's what is important to me.
My recent post How To Prepare for Self-Employment
Sounds like you've thought of all the possible difficulties and already have plans to work around them. I'm looking forward to learning more about how you're staying organized for taxes from a self-employed perspective. That's something Leslie and I need to learn a lot about before we make the leap into complete self employment.
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Thanks Kyle!
And ugh staying organized is not a good quality of mine. Haha it takes a lot of work!
My recent post How To Prepare for Self-Employment
I think you're definitely on the right track with everything. I think if you really want to have a new house, maybe try and get that done before you quit your day job, otherwise you might end up with a much higher interest rate otherwise. If I'm remembering right, crystal from bitfs paid about 1% more than current market rates when they got their new house last year and had all sorts I hurdles because of te self employment.
Thanks! And yeah we definitely plan on buying the new house while I still have a job.
My recent post How To Prepare for Self-Employment
Sounds like you've thought of pretty much everything – good for you for considering health insurance. I think other things to consider is how you'll keep socially connected and be sure to get out of the house!
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Thanks! And yes we want a house that will be good for self employment also. I don't want to be bored out of my mind.
My recent post How To Prepare for Self-Employment
We live on way less than my side hustles income. Less than $3,500 a month altogether thankfully.
And I'm glad that you said that you would still love self-employment if it weren't for dry months.
My recent post How To Prepare for Self-Employment
Congrats! I think the biggest thing for me (I only lasted 2 months of boredom) was not having something to do at every minute of the day. Schedules are really important, even if you're filling them with non-work related things. Having that structure makes actually working a lot easier.
Thanks for stopping by Daniel! And I didn't know that you made the switch at one point in time. Did you go back to your old job?
My recent post How To Prepare for Self-Employment
Thanks Jake! And that is a good thing to think about with the utilities. Thanks!
My recent post How To Prepare for Self-Employment
Spread your clients but that's easy to say. It really depends on the type of work. Housing is an analogy. So people build houses and once they are sold, they get a shed load of money then move on to another house. Other trades are like plumbers or painters and decorators – they may have customers but most people don't redo their house every year – every 10 more like it. Others are like window cleaners or gardeners – regular work at a lower rewards but it is steady.. So you always need side hustles from completely different areas to build the savings and insure against a rainy day. Looks like you've got it covered anyway.
Thanks John! 🙂
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i am making the switch too. all of your posts are so incredibly helpful. THANK YOU!
WOHOOO! What do you plan on doing in self-employment?
My recent post How To Prepare for Self-Employment
This list looks great! You're two years ahead of me as I would love to work for myself as well. Thanks for providing such well thought out and pointed concerns, etc.
Thanks Michelle!
My recent post How To Prepare for Self-Employment
Good luck! I think if you're looking to get a new house soon I would put off leaving your job till you have that wrapped up. It will just make the whole process so much easier. Other than that it sounds like you've got a good handle on what it will take and the hurdles you might face. I look forward to following your progress!
Yup I agree about the house! We will definitely be buying before I make any switch.
My recent post How To Prepare for Self-Employment
Sounds like you have a strong plan in place! Good luck on making the jump!
Thanks Catherine! haha that's probably not good that it smokes!
My recent post How To Prepare for Self-Employment
Man, I can’t begin to explain how much I wish I had come across this, or something like it, before I decided to branch out and start my own business. These are awesome tips that everyone should be taking a serious look into and internalizing, if they are interested in starting their own business endeavors. Still although I have already begun with my own, there are still a lot of things here that I can get started on now, so I’ll have to be sure to get on that.
Thanks 🙂