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With freedom comes great responsibility, isn’t that what they say? Self-employment could be the greatest example of this there is. The freedom of being your own boss comes with countless benefits. You make the rules, you set the hours, and you write the paychecks, not to mention you get an incredible sense of self-worth from being able to spend more time with your family because you’ve carved your niche into the business world.
Self-employed individuals make up nearly 15 percent of the work force since 2010, and the number of people who strike out as entrepreneurs has risen steadily due to the effects of the recession and the expanding world of the internet. If you’re thinking about joining their ranks, it’s important to know ahead of time what your responsibilities will be.
One of the reasons so many start-up businesses fail is because they don’t have enough capital behind them for when things don’t go as smoothly as planned. Not only do you have to have the financial resources to get your business off the ground, you also have to have money in reserve for slower months or bumps on the road, especially if you quit your day job.
Even when you’ve established yourself, you will still be living on a variable income. Budgeting was challenging enough when you had a steady paycheck coming in, and now you have to prepare for some months being much better than others. It can definitely be a tricky way to manage your expenses.
Finding out how much you owe in taxes can be one of the most confusing parts of self-employment. Whether you are a sole proprietor or an independent contractor, you will probably portion out around 15 percent of your income for the government. The amount you owe in social security depends on how much you make for the year, but self-employed people can usually deduct much more than regular employees. It’s important to save your receipts and put aside some money every month.
You also have to think about retirement without access to an employer sponsored 401k plan. Hiring a good accountant to help you figure it all out, especially when you’re new to self-employment, can be an important step.
3. Health Insurance
One of the things the Affordable Care Act promises to do is make health insurance less difficult for self-employed Americans. In the past, many people have been scared away from the prospect of starting their own business because it meant giving up their health benefits.
If you have children or medical needs of your own, that might not be an option. But shopping around for affordable premiums can get easier depending on where you live and how many people you need to cover. And the upside is that 100 percent of what you pay for healthcare premiums can be deducted from your taxes every year if you’re self-employed. That could be the deciding factor if you’re unsure whether health insurance is within your means. Advisors such as Briggs & Butler can help you with your search for private medical insurance.
If you’re running a business or just selling your own services, it can be hard to get the word out, especially when so many small businesses are all over the internet. When it’s just you, you have to figure out your own way to stand apart from the competition. This can mean learning how to interact with clients, use social media, and make valuable connections.
When you’re starting out, you won’t have a large network of employees to help you with everything that running your business entails. With all the other things to consider when it comes to keeping afloat financially, you can’t neglect spending time developing ways to build your brand and make your business successful.
Self-employment can seem like a really tall order, but there’s a reason it works for over 40 million Americans. There is an enormous amount of self-discipline involved in working your own schedule, but it’s a great motivator in itself. Nothing can beat the feeling of knowing you never have to be an employee again. The internet is so vast and the opportunities for success are so great that for many people, it seems crazy not to take advantage of this new age of entrepreneurship. It might take some extra effort to manage your responsibilities, but the freedom that comes along with self-employment makes all the challenges ahead of you worth it.
Amie Gottschalk is an avid blogger. You can follow her on Twitter @amiegottschalk.