Establishing Your Self-Employment To Avoid Major Surprises
Stepping into self-employment is both a freeing experience and one that requires more prep work than might seem immediately obvious. Working under your own supervision on a flexible schedule may sound somewhat loose and free-form, but a lack of planning for the financial and lifestyle changes that freelance work requires is a disaster waiting to happen. Here’s how to be self-employed and still secure.
Save now, work later
In an ideal scenario, self-employment begins after you’ve saved up enough money to keep yourself supported while you find your footing and begin drawing income on your own terms. Having a safety fund is an essential portion of ensuring you don’t take a financial hit in the event of unexpected unemployment, hospital bills or similar incidents. Most experts suggest around three to six months’ worth of income makes for an ideal emergency fund, but that number could be even higher in the case of transitioning to self-employment.
On top of the temporary loss of income you may experience, starting a business or moving between careers will almost always come with its own set of expenses. You might only have to invest in craft supplies and web hosting if you begin selling something you create or you may wind up needing office space and industrial equipment. If you burn through your existing emergency fund just to establish yourself you run the risk of losing more than you bargained for if a personal tragedy takes you out of the working world, especially in the fledgling days of your start-up.
Insure yourself early
Establishing an insurance plan that meets your needs is a difficult enough proposition without having to worry about plans that cover your workspace and potential work-related travel. Worse yet, many self-employed individuals miss out on being able to buy small company insurance as those plans are geared towards a company owner providing plans for up to fifty individuals rather than a sole worker insuring themselves.
There are various methods to find coverage for the self-employed depending on your marital status, union availability or willingness to utilize short-term policies until other avenues become available. Life insurance is only the first step, however, as you’ll also have to weigh the costs and benefits of liability policies to protect from financial loss or disability insurance in the event of an unfortunate accident that leaves you unable to work.
The upside to investing in proper life insurance comes in the form of flexibility for your future and peace of mind for your family and loved ones. Not only will they be cared for should you pass away, you can also utilize life settlement options to cash out of a policy if your financial situation changes and operating capital becomes more important than future insulation.
Networking is your new part-time job
You may be working on your own terms, but those terms will be meaningless if you can’t find ways to have your work presented to the world outside of your office. Many jobs handle the minutiae of advertising, negotiating contracts and keeping customers happy yet self-employed individuals also take on the burden of being their own public relations firm on top of their other responsibilities.
As with many facets of business, who you know will dictate business opportunities years ahead of time. The simple power of word-of-mouth advertising and staying on friendly terms with individuals and other business owners in your community is a key part of self-employment networking that requires a level of forethought many business owners aren’t prepared to handle the moment they go public. Don’t worry about buying billboard ad space or TV time as soon as you establish an office, but keep an eye out for opportunities to offer your work to those who can recommend you to their associates and friends in the future.
To become self-employed in a way that provides financial security you must prepare for your business’ future as well as your own. Operating as a boss and an employee means taking on more responsibility, but handling those expectations in an effective way is just a matter of knowing what you’ll be up against and forming a business plan accordingly.