6 Things You May Not Have Known About Being Self-Employed

By May 16, 2018 Accounting, Taxes

 

6 things you may not have known about being self-employedBeing your own boss.

That sounds like the dream, right? For some people, maybe. Others may be appalled at the thought of being self-employed, but it is a trend that is on the rise. Within the next few years, 27 million Americans are expected to enter the self-employment workforce.  According to the IRS, you can normally be considered self-employed if:

Are you considering the option of being self-employed? You probably knew that being your own boss doesn’t necessarily mean sleeping in every day and taking 3-day weekends each weekend, but there may be a few things that you didn’t know.

It can be lonely

It can be lonely to be self-employedWhen I became pregnant for the first time I had recently left my traditional job and begun freelancing. In many ways it was perfect timing. I didn’t have to build an extensive wardrobe of maternity of work clothes, I didn’t have to worry about the smells from other people’s lunches sending me running from the break room, and I didn’t feel self-conscious about the number of trips I took to the bathroom within an hour. However, I realized that I missed having co-workers during this time in my life. I wanted to celebrate this new stage and talk with others about it. I wanted an office baby shower—not for all of the stuff—but to feel like I was a part of a community. All of this to say that working for yourself can be lonely and isolating. There are no longer those day-to-day interactions with people or office inside jokes. However, just because being self-employed can be lonely and isolating, especially at first, it doesn’t mean that it has to be. Neil Patel points out that self-employed works can be, “…busy meeting clients, greeting customers, mingling at networking sessions and interacting in coworking spaces.”  It’s also important to build up your tribe outside of work to combat this loneliness. Strengthen ties with friends and family.

You have to pay taxes for being self-employed

 As someone who is self-employed you are still responsible for paying taxes even though you do not have an employer taking them out of your paycheck for you. You also have to pay something called Self-Employment Tax. Self Employment (SE) tax is essentially the same as the Social Security and Medicare that is taken out of the paychecks of those who are traditional employees. Be aware that as a self-employed person you typically need to pay estimated taxes to make up for the fact that there is no income tax being taken out of your paychecks.

 It can be confusing figuring all of this out, so it is a good idea to work with a qualified accountant who can help you.

You may actually work longer hours

 Being self-employed can give you a great deal of freedom and a break from the traditional 9-5 schedule. This is appealing to many of us, and it allows us to pick up kids from school, more easily make doctor’s appointments, or spend time with friends. What it doesn’t mean is that you work less than you would in a traditional job.

Self-employed entrepreneur Molly Cain writes, “…to succeed out on your own, you have to understand that being self-employed does not mean a shorter work week – in fact, it usually means a longer day and week.”

Yes, there is flexibility, but remember that with self-employment there are no paid vacation, sick, or personal days. That may impact the amount of time you take off.

 Self-employment may look different than you think

 You may be a poet and you didn’t know it! Or, you may be self-employed and you didn’t realize it….something like that. Being self-employed can come in a variety of different forms. You could be self-employed if you pet sit, sell things that you make (think Etsy), or you buy old things and resell them. Click here for a list of surprising ways that you could be self-employed.

No man is an island

 Being self-employed does NOT mean that you have to go it alone. As the great poet John Donne once Being self-employed does not mean that you have to go it alonewrote, “No man is an island entire of itself; every man is a piece of the continent….”  He probably wasn’t referring to self-employment, but then again, during the 16th century, without the advent of large companies, many people were working for themselves. Even if this specific circumstance isn’t exactly what Donne was writing about, the sentiment can still be applied. Just because you are self-employed does NOT mean that you have to do everything. Most likely you can’t, and if you try, things will fall through the cracks. Consider hiring freelancers or independent contractors to help you with things like accounting, HR, and marketing.

 You may be happier…or you may not be

The Second Annual Self-Employment Report from FreshBooks states, “Self-employed professionals overall enjoy more career satisfaction than those with traditional jobs….”  Being self-employed could easily become the best thing that ever happened to you, however, it’s not for everybody for every phase of life. Real Estate Investor Brandon Turner explains why he stopped working for himself and went back to working for someone else in this article.

Are you self-employed or a small business owner? Check out us at Lucid Advisory and Finance for financial advice.

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