6 Considerations Before Becoming Self Employed
This post may contain Affiliate Links
This is a sponsored post
My husband and I have both been self-employed for over three years now. He works as a subcontractor and I work as a freelance writer and blogger. While being self-employed works for us, it is a big scary step to take and there are lots of things you should consider before becoming self-employed.
6 Considerations Before Becoming Self-Employed
Self-employment offers lots of advantages. The biggest one for me personally was being able to look after my little girl and still work without needing to pay for childcare. It also means I can work from anywhere and take holiday whenever I like.
However, it does come with its disadvantages too.
Being completely freelance means I’m entirely responsible for my earnings. I’m lucky to have built up a good client base, many of whom I now work with regularly, however, there are still some months where I worry about how much I’ve got coming in.
1. Should You Start With 50/50?
If you’re thinking about becoming self-employed you may already have a small business. Many people start out with a small side business which eventually becomes their main source of income.
This transition can take a long time though, and there’s often a tipping point where you don’t have enough time to spend on your small business but on the other hand it’s not making enough money to fully support you.
If it’s a possibility then you may want to consider part-time hours at your employed job to focus on your small business. This is a good way to go as it gives you more time to focus on your own business but employment still provides a steady income while you build the business up.
2. Have You Saved An Emergency Fund?
Having a good emergency fund is essential for financial stability. It means that any emergency is covered and it can stop you having to go into debt if something unexpected crops up.
Having an emergency fund for your business can be a good idea too, especially when you’re just starting out and your income is likely to fluctuate quite a bit. When I first left my job to freelance full time, I had over a years salary in savings and we would not have managed without it!
3. Do You Have A Business Plan?
A business plan doesn’t have to be big or fancy but it is a great way to help keep you on track and pushing forward with goals for your business. Even if you only achieve one or two small things a week, you’ll be able to look back in a year and see how far you’ve come.
You may also want to have a backup or contingency plan for if things don’t work out.
4. Can You Protect Yourself With Income Protection Insurance?
Another thing you may want to consider before becoming self-employed is income protection. This type of insurance covers a percentage of your earnings if your income is affected by illness or injury. While it’s not something we like to think about, it can and does happen.
We took out this type of insurance last year after my husband had three accidents at work in the space of a month. Thankfully none of them were serious (although in one he was very lucky not to have broken his leg, and in another, he broke three fingers!) but it did give us a scare and made us think about how we would manage if he couldn’t work for an extended period.
The amount of money provided will depend on the type of cover you choose but is usually between 50% – 70% of your usual income. As self-employed people aren’t entitled to sick pay this is a great way to protect yourself should anything unexpected happen.
5. Can You Afford To Continue Learning?
Learning new skills and continuing to expand your knowledge is a great way to ensure your business stays on top of any new trends.
The year 2020 has definitely shown us that literally anything can happen and many businesses have had to change and adapt to stay afloat in these difficult times.
As your business grows you may end up learning new skills, for example, social media and marketing, that you enjoy doing and then can then offer as a service to others.
I also found that the more I worked on my business, the quicker I became at certain tasks, meaning now I earn more because I spend less time doing things that used to take me hours.
6. Keep On Top Of Record Keeping for HMRC
The thought of registering as self-employed and doing your first tax return can seem pretty scary but it’s probably actually easier than you think.
While you may not be ready for an accountant just yet there are lots of good value online accounting software companies out there.
These can make your life much easier as they do a good chunk of the accounting for you, provide invoice templates and predict how much tax you’ll need to pay. You can also upload pictures of your receipts which saves needing to keep lots of fiddly bits of paper.
However, if you want to stick to doing everything yourself then my advice would be to keep everything and keep the most detailed records you possibly can. You will thank yourself come tax return time!
