Many people dream of walking away from the 9 to 5 and being their own boss. When you freelance full time, that’s exactly what you do.
However, there are a number of things to consider before turning in your resignation and heading home to work.
The first thing to do if you’re considering full-lancing (freelancing full time) is to determine what kind of business you want to set up. There is a plethora of possibilities out there. You might want to ask yourself if you would rather gather clients and products on your own or join up with a company that can help you get started. If you prefer sales to activities such as writing or web design, you might want to consider a company like Amway, which will help you get started and teach you what you need to know to be successful. Once you’ve made this decision, it’s time to get into the nuts and bolts of owning your own business.
Deciding what products or services to offer and obtaining clients are only the first steps to becoming a successful full-lancer. There are a number of financial considerations that have to be dealt with from the outset. One of these is to ensure that you have a start up fund that can get you through the first few months. You should have three to six months’ worth of money saved up to cover necessities until your business is making money on its own. You’ll also want to have an emergency fund that can be used to cover unexpected expenses. A good accountant is also a must. This person will be able to tell you how much you need to set aside to pay the taxes on your business as well as ensuring that you know when they need to be paid.
One advantage to the 9 to 5 job is that most of them come with benefits, such as health insurance. Once you set up your own business, this advantage is no longer an option. You can purchase insurance through COBRA, but this is only a temporary fix, so be sure to research plans you can purchase yourself.
Most of us dream of the day we can retire, but doing that takes planning. The 401(k) that comes with company employment doesn’t exist when you work for yourself, but there are options out there. For example, some options are a solo 401(k) or a Roth account. You’ll want to contribute 10-20 percent of your income to the account. “If that amount seems daunting to you, start small. Open a Roth or traditional Individual Retirement Arrangement (IRA) and contribute up to the limit, $5,500 (or $6,500 if you’re 50 or older),” suggests Forbes senior editor Laura Shin.
Starting your own business can be an exhilarating and rewarding experience, but it isn’t something to be considered lightly. Make a plan before you ever get started and determine which options are best for you. Make sure to take taxes, health care and retirement into consideration before you get started. Having an established plan in place will make life easier later.