Self-employment is on the rise, and it won’t be slowing down anytime soon. Freshbooks, an accounting software company, forecasts that within the next two years, 27 million workers will take on the challenge of becoming self-employed. Many will cite greater flexibility as the reason for their change. Employees find decreasing value in traditional jobs, and instead want to become their own bosses. Once they switch to self-employment, their job satisfaction increases.
Since becoming your own boss means more flexibility and greater job satisfaction, why doesn’t everyone take this route? The answer is simple. Becoming self-employed is no easy task. You will face challenges every step of the way, and once you start you won’t have a chance to slow down, at least not for a while.
No Backup Plan
If something goes wrong, you may well be on your own. Many small businesses and self-employed workers don’t have a plan if a financial crisis occurs. They are entirely unprepared should someone sue them, or if they become disabled and can no longer run the business. And many do not save for retirement or have any life insurance.
Be ready to miss a payday
Becoming self-employed means becoming your own boss, which also means paying yourself. Be prepared to miss a paycheck if a client doesn’t pay on time, or if your business is not as productive as hoped. Never spend money you don’t have, and create a savings account on which to fall back. If you don’t, you may end up running out of cash.
No accounting background
Many self-employed business owners don’t have a financial background, which requires quite a bit of self-teaching. They must create budgets, file taxes, and understand cash flow as money comes in and goes out. They must create a business plan and follow it.
Don’t forget about taxes
Taxes and health insurance premiums get automatically deducted from your paychecks as an employee. When you become self-employed, such deductions won’t be done for you. Instead, you must consciously put money aside for them. If you don’t set aside money when you have it, you may not have any when you need to pay taxes on your earnings.
When you become self-employed, everything in your business will come from a do-it-yourself perspective. Be ready to handle the marketing, selling, and financing of your business, in addition to working as an employee. As your business grows, you will have to handle more work with fewer people. You will feel stretched thin on occasion.
Becoming self-employed has many benefits like setting your own schedule, choosing clients you want, and leading others. But take into consideration the tasks and risks that come with the benefits. Be prepared to to deal with them. You must be careful when you are self-employed because failure could leave you with nothing.