Thursday, March 13, 2014

Considering Self-Employment?

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
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.

Life Insurance
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.
Disability Insurance
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 :)


  1. really great post Edi, and some excellent advice!

  2. Since my day jobs don't offer benefits (one has enough life insurance to ALMOST pay for a funeral), the only benefit I'd be losing is tax withholding. I'm only there for the extra paychecks. I don't think I could even contemplate quitting my day job if I had all those benefits at my age -- but for a young, healthy person with a thriving handmade business, it makes sense.

  3. Yep, excellent points that people need to consider. The overall "just because your business is making money doesn't mean you get to take all of it home" argument is one that not everyone thinks about before they take the leap.

  4. Great points! Don't think I'll be making the jump anytime soon. Whew.

  5. Paige is absolutely right. Great points here!

  6. Thanks Edi for sharing this great info!

  7. These are all excellent points! I've had my own health insurance for years and yes, it can get expensive. I don't know if there will be less expensive plans available now with the Healthcare Act or not, but I'll probably need to do some investigating soon. And it's easy to brush off things like retirement and disability when you're young and in a hurry to leave your current job, but you really can't take that stuff for granted.

    I appreciate your business savvy so much, Edi! That's the part that always feels like foreign territory to me and probably a lot of other creative types. :)

  8. Very good advice! Thank you for taking the time to share it too! Since I do the tax returns for lots of small businesses I see the good with the bad for those who didn't plan and it's not as rosy as many think. You have lots of business smarts and it's nice of you to share your knowledge with others!

  9. great advice Edi! thanks for sharing. Yes lots of things to consider before taking the plunge. I'm glad my hubby is a business coach, so he helped me a lot in the process :)

  10. This is such great advice, Edi!
    I had a late start to becoming self-employed, so unfortunately disability insurance is sky high. Wish I had known at 30 where my path would lead...
    LOVE the boss lady sign!

  11. Great comprehensive list! I'm, unfortunately, with LeAnn - even when I worked 40 hours a week outside the home I didn't have any type of insurance (though I think technically I was allowed by buy into a 501K through my employer). It's pretty cool the SC government doesn't give many of its employees any benefits, including sick leave or holidays. /sarcasm
    Anyway, great list with things I need to start thinking about!

  12. Great advice... it's why I wasn't able to do it until my late 40's.

  13. Great post Edi! It is so expensive. It took me many months to get to a point financially that I could afford to be self employed. I'm officially signed up for health insurance on my own effective April 1st!

  14. Thanks for the reminder! I know how fun it is to be self-employed, but the benefits of being employed must be considered too. Your employer can help you paying with your healthcare, life insurance and taxes. If you think you'll have a greater opportunity and a larger income in a business, don’t stop yourself and pursue it. You can just allot some of your income to insurance. :)

    Pat Turay


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