Last week's post about becoming incorporated got a lot of discussion going with other bloggers and business owners. We got to talking about some very important parts of being self-employed and I thought I'd discuss those today.
While quitting your full-time job and working for yourself sounds awesome (which it really is!), there are some things to consider when leaving your full-time job. Your employer may offer you a lot of benefits that being self-employed will not.
Medical insurance can be very costly. Chances are, your employer is able to offer you medical insurance at a fairly low rate. Insurance for self-employed individuals can cost about $300 per month.
I don't know if this is a common benefit for employers, but my old employer offered free life insurance up to the amount of my base pay. I could also double or triple this amount for a nominal fee every month. Individual life insurance plans will depend on the amount of coverage you want, your age and your past health.
Most full-time employees are offered disability insurance in the situation where you are unable to work for a period of time (surgery, car accident, etc). This may be full pay or partial pay depending on your employer and how long you have worked there. As a self-employed individual, have you thought about what you would do if you couldn't work. For a month? For six months? Definitely something to think about. Again, rates will depend on your age, the amount you want to collect each month, etc.
My old employer offered a retirement plan where they matched a portion of my contribution. And they made it easy to participate as the money came (pre-taxed) out of my check each week. Now that I'm self-employed, that entire amount is dependent on me.
When you work for a company, your taxes are paid each pay period before you receive your paycheck. This makes it easy to pay your taxes because you don't have to think about it and it's all taken care of for you. When you are self-employed you will need to pay estimated taxes each quarter. It really isn't hard to do, but you must budget for them. Not all crafty business owners are good at the business side of things. (left-brain vs right-brained). So this may be something you need to pay a profession to help you with. If so, you will want to budget for it.
While I don't want to discourage anyone from quitting their job and living their dream, I just wanted to point out some things that aren't always thought about when running numbers. I know I hadn't considered disability insurance until the other day. Just a little food for thought :)