Money-Smart Solopreneur. Laura D. Adams
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your business, you’ll likely rely on other solopreneurs or small businesses for help with a variety of tasks. But if they don’t give you the results you want or have a bad attitude, you can easily find replacements. Being self-employed means that you call the shots about whom to hire and let go. As your business grows, you’ll have more control over the people, companies, and industries that you want to work with.
Being your own boss means you can and should surround yourself with great people. Weed out anyone who doesn’t uplift you or have good energy. If you have a client who’s a jerk, you can fire them.
Yes, there are times you will have to keep a difficult client because you need the income. But remember that you’re still in charge. Working with people you enjoy and who make you feel confident is one of the best things about being in business for yourself.
6. You Decide When to Work
One of the most valuable parts of having your own business is the flexibility that comes with it. Depending on your business, setting your own hours, wearing workout clothes all day, and cuddling with your pet while you work may be possible. You may be able to take care of your kids or aging parents more easily when you’re self-employed than if you had to report to a day job.
As long as the work gets done, you can create work habits that fit the lifestyle you want. You set your own priorities when you’re self-employed. In some cases, you might work more hours than you would in a W-2 job. But it can still feel healthier because you organize it around your schedule. If you need to work late into the night or on weekends to have more free time during the week, you can make it happen.
Being a small-business owner gives you a freedom that rarely comes with a W-2 job. Yes, venturing out on your own or starting a side hustle can come with risks and struggles—but it can also turn out to be well worth the effort.
7. You Choose Where to Work
Many solopreneurs can work wherever they want. That could be a tiny studio apartment, a leased space in an office park, or a coffee shop abroad. You could live a remote lifestyle while you travel frequently and work anywhere with an internet connection. I’m writing this and doing other work from home during the coronavirus pandemic that’s caused so much turmoil in the global markets. Having the option to hunker down and still earn a living is a tremendous benefit that can’t be overstated.
If you’re like me and mostly work from home, you rarely have to set an alarm clock to get up early and fight traffic. You don’t have to commute or work in a cubicle or a noisy, open-plan office. Best of all, you can opt out of time-sucking office politics, gossip, and mandatory celebrations.
Unless you see clients frequently, you can also save a bundle on office attire. Most of my days are spent in activewear or casual clothing unless I’m doing video work at home or in a studio. In general, being self-employed gives you much more freedom than working for someone else.
8. You Can Claim Money-Saving Tax Deductions
You can claim a variety of business tax deductions, whether you’re a solopreneur, a part-time freelancer, or the owner of a large corporation. These deductions help entrepreneurs manage the costs of running a business.
The IRS says that to be deductible, an expense must be both ordinary and necessary for your trade or business. Some common deductions for small businesses and solopreneurs include office supplies, marketing, equipment, and professional fees.
In general, you can’t deduct your personal or living expenses from business income. However, if you have costs that are both personal and business, such as a vacation combined with an industry conference in Hawaii, you can deduct the portion related to business.
Additionally, if you use part of your home for your business, you may be allowed to deduct a variety of expenses by claiming the home office tax deduction. If you qualify, this is a valuable tax break that you should be sure to take advantage of. You’ll learn more about typical business write-offs in Chapter 13 and the tax benefits of having a home office in Chapter 14.
The Cons of Being a Solopreneur
Working for yourself clearly comes with many advantages, but you shouldn’t discount the disadvantages. Only you can decide if the pros of being a solopreneur outweigh these eight main cons.
1. You Don’t Have a Regular Paycheck
Being your own boss means that you have to put in some hard work without the guarantee of a steady paycheck. As an employee, you get paid regardless of the state of the economy or your company’s monthly profitability.
While you could make more with your own company than with a W-2 job, it could take time to build revenue. Even then, your income could vary significantly each month or each year. Most solopreneurs have up and down periods based on multiple factors, such as the economy, seasonal changes, and your efforts and skill level.
Independent workers have to pay closer attention to their finances than most salaried workers. If you can start a solo venture on the side while keeping your day job, that’s a great way to keep your income stream flowing. It also gives you room to experiment with your business idea and test the market for potential customers.
2. You Aren’t Legally Protected
There are a variety of federal and state laws that protect employees, such as receiving a minimum wage, getting overtime pay, and not being subjected to harassment or discrimination. Employers over a certain size must offer leave to care for a new child, aging parents, or family emergencies, as well as for military service and jury duty. As a solopreneur, you don’t qualify for any of these worker protection laws.
3. You Have Tax Requirements
Many entrepreneurs are caught off-guard by their tax requirements when starting a new business. When you work for someone else, your employer withholds your federal, state (where applicable), Social Security, and Medicare taxes from your paycheck. But when you’re self-employed, you generally must estimate these taxes and pay them yourself every quarter.
After you’ve been self-employed for a while, you’ll know a lot more about taxes than your friends who only have to fill out a W-4 when they start a new job. While dealing with taxes can be a hassle, especially when you’re getting started, you can always use tax software or hire a professional. And after you’ve read this book, you’ll know exactly how to pay your taxes and stay out of trouble. In Chapter 10, I’ll recommend some of my favorite tools that will help you stay on top of your taxes.
4. You Must Purchase Your Own Insurance
In addition to taxes, one of the most significant expenses you’ll probably have to pay as a solopreneur is insurance. While workplace benefits typically aren’t free for employees, many companies offer a variety of products—such as health, dental, vision, life, disability, accident, and hospital insurance—at competitive, and often subsidized, group rates. Unless you have a spouse or partner who can add you to their health insurance, getting individual coverage will likely cost much more.
When you leave an employer with 20 or more employees, you typically can maintain existing health, dental, and vision coverages for up to 18 months through a federal law called the Consolidated Omnibus Budget Reconciliation Act (COBRA). However, your employer won’t be subsidizing you anymore, so the premiums could be significantly higher.
But COBRA doesn’t apply to other types of insurance, such as life or disability, so you generally lose those coverages by the end of the month you leave an employer. Maintaining a day job while you build your business on the side can allow you to hold on to valuable benefits indefinitely or give you a smoother transition until you can afford to purchase benefits on your own. We’ll cover much more about creating your own benefits package as a solopreneur in Part V.
5. You Must Plan for Your Own Retirement
Being your own boss means you’ll have to plan for your retirement. You won’t