For many people, being self-employed appears to be living the dream. Whether you’re looking to escape an unpleasant boss or get away from commuter life, switching to the self-employed lifestyle looks – on the surface at least – like a much healthier and more enjoyable way to work. However, that’s not always the case and many freelancers find it a tough and unpredictable life.
If you’re planning to go self-employed and you want to make sure that it lives up to expectations then it pays to be prepared. Here are our top tips for success:
Start with savings. Before you make the leap to being self-employed it’s a good idea to do some groundwork first. The most important thing is to ensure that you having savings. It can take some time to get established in a new career, especially one that is a self-employed business and you may need funds to pay upfront for networking, marketing or investment in essential equipment.
Plan your move. While you’re saving up to go self-employed it’s a good idea to look into the viability of the way that you’re hoping to live in the future. Research the sector that you want to enter and identify your potential competitors, whether the market is saturated and who your clients and customers might be. Decide how you’re going to find work, what kind of pricing structure to use and whether there are any specific laws or regulations that you need to take into account.
All work and no play. Many self-employed people struggle to set boundaries when it comes to building their business. If there’s work to do at 11 pm on a Friday night and you need the money then why not just do it? It’s crucial to start out by creating a separation between work and non-work in your life if you want to be positively self-employed. Decide what your working hours will be and turn off emails after that time. Don’t work weekends and keep special occasions free. If you don’t then burnout and exhaustion await.
An accountant is essential. If you’re used to having tax, National Insurance etc dealt with by an employer then it’s very easy to get into a bit of a mess when all of that becomes your responsibility. Although you’ll still have to get to grips with the basics of this yourself a good accountant can help you navigate the waters of self-employed finance, from whether to operate as a company to what expenses can be set off against tax.
Integrate tech into your life. Technology can be enormously useful for the self-employed today, enabling you to work from just about anywhere, whether that’s a hot desk or a sun lounger. The key is to choose the technology that will genuinely benefit your business and don’t take on so much that using it becomes another chore to manage.
Get good at managing your money. It pays to be skilful when it comes to self-employed finances. You might have incredibly lean months so it’s important to have some cash set aside as a buffer for those times. You’ll also need to get used to putting aside a proportion of your income every month to make payments on an annual tax bill.
Use credit cards as a backup.It’s easy to get into trouble with credit cards and if you’re self-employed and you have a few lean months you might be tempted to use them for essentials. However, the totals can soon add up and if you don’t have a 0% deal – or that deal comes to an end – life could get very tight, very quickly.
Don’t waste money on non-essentials. For example, it’s a good idea to regularly audit your direct debits to check what’s leaving your account. Are you still paying for subscriptions that you don’t really use that are essentially now a waste of money? If so, that’s cash that you could be using in your business, or as a financial backup instead.
Shop around for good deals. It’s even more crucial to pay less for something like a mobile phone or broadband when this becomes a business cost that could eat into your profits. So, shop around to make sure that you’re paying as little as possible for the services that you use regularly and take advantage of any discounts.
Being self-employed can help you to create a flexible lifestyle with a lot of freedom. However, it also comes with a responsibility for every aspect of your working life, from paying tax on time to defining your working hours. If you’re prepared for the leap then it could be the start of a wonderful journey.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read more about Amanda Gillam