By now, you might be feeling overwhelmed by all the financial elements of working for yourself. After all, no one ever tells you that self-employment effectively means starting a business even if you just want to freelance.
The thing is, you don’t have to master all of these areas in a day. Start with the basics, such as building a savings account, landing clients, and staying on top of your tax obligations. Then you can grow from there.
- Self-motivation and discipline are essential to succeeding as your own boss.
- It’s a good idea to have a fully funded emergency savings account before you strike out on your own.
- You should create a budget for your business expenses just as you do for your personal expenses to make sure you’re bringing in more than you’re spending.
- Although it can be simpler to work as an individual contractor or a sole proprietor, there can be tax advantages to creating an S Corporation or LLC.
- You face a much different tax situation as a self-employed person than you do as an employee, including paying higher taxes overall but also taking more deductions.
- You’ll need to pay quarterly estimated taxes both at the federal level and to your state treasury. Make sure to set aside money for these payments regularly.
- It’s important to keep saving for retirement even when you don’t have access to an employer-sponsored plan. Consider whether a traditional IRA, Roth IRA, SEP IRA, or Solo 401(k) is the best account type for you.
- One day your business may face unexpected hurdles, such as being sued by a client or losing business during a recession. That’s why it’s important to make sure you have strong personal and professional safety nets in place.