The goal of running your own business, or being self-employed means setting your own workload and starting work whenever you want. It is, after all, your business, right? Wrong. In going self-employed it may mean that you will have to do more work, whether that is to get your new business off the ground, or you are realizing the nature of being self-employed means that you are snowed under with work one minute, and not getting a snowflake the next. But what does it mean for you on a financial level? Are you going to be better off, or considerably out of pocket?
The lack of pension is the first thing that is glaringly obvious. Without an employer to contribute to your basic pension fund when you retire, that means that you need to add to the pot yourself. But based on the feast or famine nature of working for yourself, will you be able to find spare money to put aside for your later years? In the UK, nearly half of people who work for themselves have no savings in place at all. Having an independent savings account where you are unable to access the funds without a charge is a sensible option, because you can to contribute to the pot without having to dip into it on occasion.
Doing your own tax is a headache of many people that go self-employed, especially in those early years. By being organized, and understanding what things you can claim business expenses for is a great approach to saving yourself some money on paying the taxman back if you have underpaid throughout your tax year. You can contribute on many things that a lot of people don’t realize, for example, if you work out of an office in your home, or a specific room, you can claim for the utilities on that room and so you are saving on your bills. There are many tax places that offer services and can help you with what exactly to claim for, in addition to them doing your tax return, saving you a headache!
Do you get sick much? If you do, it will have a direct impact on your earnings. The perks of being employed, such as sick pay, are not available to you when working for yourself. As well as holiday pay, maternity leave, paternity leave, the list goes on. The question to ask yourself is if it makes more sense regarding your responsibilties in life to gain employment? This all depends on your line of work. If you are running your own business, marketing and networking are vital skills you need to be schooled in to help generate revenue and to provide you a good pay packet.
The risks with going self-employed are apparent. You need to weigh up your life responsibilties and see if working for yourself results in a better lifestyle. Planning for the future or retirement is much more difficult when you are living paycheck to paycheck. And financial security needs to be a major priority, however old (or young) you are.