Being self-employed is a dream come true for many people. Most spend years getting the cash together that would allow them to quit their full time jobs and begin working for themselves.
Not knowing what to expect regarding the costs of working for yourself, can cause serious issues…
In order to keep that dream from turning into a nightmare, there are things that need to be understood about self-employment.
Not knowing what to expect regarding the costs of working for yourself, can cause serious issues. Some financial aspects of being self-employed aren't always obvious. The following are a few of those expenses that you should plan for so that you are covered financially in the future:
1. Unsteady Pay – You have to understand that working for yourself, particularly in the beginning, can lead to very unsteady paydays. While you are accustomed to receiving your paycheck regularly when working for someone else, this may not always happen when working for yourself.
You have to plan accordingly and ensure that you are set financially, just in case those paychecks are a bit late in coming.
2. Maintenance Costs – While you may very well have accounted for start-up costs, you also have to bear in mind that there are many maintenance costs associated with running your own business. You have to keep all equipment maintained and upgraded when necessary.
Even those who work from a home office have various maintenance fees that they are required to pay in order to keep equipment running properly. Do you have to attend training regularly to stay up-to-date in your industry?
3. Taxes – You have to understand that your taxes are your sole responsibility when you are self-employed. While your employer may handle your income taxes when you work for someone else, this is your responsibility when you work for yourself. It will also be up to you to keep track of your expenses, so that you have a list of things that you can claim come tax time.
4. Retirement – Retirement is one reason that many people choose to work for someone else. When you are self-employed, your retirement funding rests solely on your shoulders. It is perfectly possible for you to save enough money to put toward your retirement, but it is a bit more difficult when you are doing all of the saving yourself without an employer to match your pension contributions.
Nixon Williams is the UK’s leading contractor accountants serving freelance contractors, interim managers and consultants.