How To Prepare For Self Employment In 2024

Self-employment gives you the freedom to set your own hours and choose your clients. With this freedom, however, comes certain challenges. Leaving the world of 9-5 employment means letting go of a certain degree of security. Here you will learn How To Prepare for Self Employment in 2024.

It’s important to prepare both psychologically and practically for a more independent way of life.

In particular, you need to consider certain financial realities. Let’s look at the top financial steps to help prepare for the adventure of self-employment

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Leaving the security of a regular job to strike out on your own to start a business can be scary under the best of circumstances.

But it will be doubly difficult and even more frightening. If you discover after the fact that you are actually underprepared to make your vision a reality.

In that scenario, the dream of self-employment can quickly become somewhat of a nightmare. How do you avoid that unenviable fate? Here are a few tips on How To Prepare for Self Employment in 2024.

Nowadays the term “entrepreneur” is part of our normal vocabulary. But no one striking out on their own becomes an overnight success.

If you’re thinking about pursuing self-employment and running your own company. Here are 24 ways to properly prepare yourself for setting out on your own. How To Prepare for Self Employment in 2024.

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Before you take the plunge, there’s plenty of research you can be doing about self-employment, in:

• Books and online,
• Including legal,
• Financial, and marketing advice for creating and maintaining your own business.

Ask people who work for themselves already what advice they can offer someone starting out. Then think about your product or service.

• What makes you different?
• Who are your clients going to be?
• Who are the competition and what are they offering?
• Do you have a plan for how you are going to advertise to them?

As soon as you no longer have a regular wage coming in from your steady job. You’ll quickly notice how you are leaking money left, right and center.

And your earning potential is at its lowest and most erratic when you are just starting out and not knowing how much work you’ll get from one month to the next. How To Prepare for Self Employment in 2024

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It’s important to build up a small survival fund, enough to last you a good few months while you get your business off the ground.

The leap into self-employment is a thrilling one, and it can be hugely rewarding. However, it pays to take the right steps to help you get off the ground with gusto and give yourself the best chance of landing on your feet.

It all comes down to being financially prepared, and we’ve put together some tips to help.

Tips On How To Prepare for Self Employment in 2024

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1. Prepare For Retirement

It’s a disturbing fact that many people are not adequately preparing for retirement. According to a recent study, one in three Americans has less than $5,000 in retirement savings.

It’s never too early or too late to prepare for retirement. When you have a job. You can arrange to have money taken out of your paycheck and put into a fund such as a 401K.

When you’re self-employed, it’s your responsibility to make your own arrangements. There are several ways to approach this. You can set up your own retirement account such as an IRA.

You can also put money into other types of accounts such as high interest savings, checking, or mutual funds. The important thing is to be consistent about saving for retirement.

2. Build A Financial Buffer: How To Prepare for Self Employment in 2024

Always make sure you have a healthy amount of money on the backburner before quitting your position in full-time employment.

Save like you would for a holiday, putting hard-earned cash aside from your Pay-slip every month so you have enough to fall back on.

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It’s likely that a lot of money will leave your bank account when you first enter self-employment due to start-up costs and investment, so having a financial buffer is essential.

Take your time to build it, and make sure you have enough.

3. Get The Most Out of Your Corporate Benefits

For many people, one of the toughest things about setting out on their own is the loss of their benefits package.

So it is smart to get the most out of those benefits before you cut ties with your old job:

• Schedule a final round of medical, vision, and dental appointments. I have a pal who was leaving a job and did this for himself and his wife, though she didn’t think it was necessary. The ophthalmologist discovered a problem in her eye. The appointment probably saved her life.
• Max out the employer matching for your 401k
• Take any classes you might be entitled to

4. Manage Your Cash Flow: How To Prepare for Self Employment in 2024

One of the biggest challenges of self-employment is uncertainty. If you’re accustomed to receiving a regular paycheck, it can be unsettling to have your weekly and monthly income rise and fall.

Some businesses are seasonal and take in more money in the summer or during the holidays. However, your cash flow can spike at unpredictable times.

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Many things outside your control can affect business: the general strength of the economy, competition, and industry trends.

When your cash flow varies, it’s important to manage your money.

• When business is good, be careful not to overspend. Create a budget and put aside money for expenses, taxes, and savings.

• Bill your clients in a way that maximizes cash flow. For long projects, consider milestone payments rather than waiting until the end to get paid.

• Consider invoice factoring. This is a system where you can get paid up front for invoices. Invoice factoring helps you maintain steady cash flow. You do, however, need established clients in order to become eligible. PayPal now offers a similar type of financing, offering customers cash advances that are paid back out of future earnings.

5. Understand Your Liabilities

Employers are responsible for handling all their staff’s tax liabilities and national insurance contributions. Deducting them automatically through PAYE.

So, if you do move from being an employee to self-employed, it’s important to understand what’s required to ensure that you pay your taxes on time.

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When you go self-employed, it’s up to you to calculate your tax, notify HMRC of how much you owe. And fill in all the necessary Self Assessment documents If you have employees, however, you will need to deduct PAYE tax and national insurance from their gross wages.

You’ll need to familiarize yourself with the Self Assessment tax return deadline and work out how to fill a Self Assessment tax return. You’ll also need to know when to make payments and how to go about it.

6. Do Extra Research

Of course you will do research as part of your business planning. But what I am suggesting is that you do even more research.

Let’s imagine that your dream is to open a Breakfast Place and you found a “great location.” But do you really know the history of that location, or what the landlord is like?

What if three restaurants have come and gone from that spot in the past few years, or the landlord is forever being sued?

Or what if the landlord wants you to sign a triple net lease. Do you know what that is?

The point is, you can never know too much about the business you are going into. Make sure you have covered every base, brainstormed every scenario, performed all your due diligence, etc.

There will be surprises as it is, so the last thing you need are problems that could have been prevented by asking a few pertinent questions.

7. Increase savings: How To Prepare for Self Employment in 2024

This is my most important item on my to-do list. We definitely want to increase our savings before I make the switch. We want to be prepared just in case there is an absolutely horrible month of income.

I would also like to have very limited debt, or just no high interest debt. I’m fine with saving the money and not paying it off if the interest rate is 0%. Luckily right now our income is high and our expenses are relatively low.

8. Be Super Smart About Money

Believe me, your new venture will take longer and cost more than you anticipate. If it only breaks even for the first year, can you survive? What if the build-out costs more than your budget allows?

The two money mistakes new entrepreneurs make most often are taking on too much debt. Or conversely, not having enough money.

So you need to be extra thoughtful about finances so that you don’t set yourself up for failure.

9. Create a New Budget: How To Prepare for Self Employment in 2024

If I will be self-employed and W will be mostly commission at his job, then a new budget needs to be created.

Every month will most likely have a much different income level and this all needs to be thought about. We definitely want to continue to live on less than half of our income as well.

I don’t want us to feel like we are struggling because we are stressed about not having any stable income.

10. Take Advantage Of Expenses

There are a number of business-related purchases for which you can claim money back, but it’s important to understand these expenses before you start working for yourself.

This will help to create a more accurate financial plan moving forwards, putting you in a better position to maintain a healthy cash flow.

You’ll also need to list these expenses accurately on your Self Assessment tax return. Citing the type and amount so the taxman can reimburse you accordingly.

11. Keep Your Expenses Low

In order for me to prepare financially to have quit my job, I made sure to have insanely low living expenses.

I lived with family, never bought a car and rarely spent money on myself when I was getting a business off the ground.

Does it suck to do these things? Yes. But it’s absolutely worth it in the end. Because I did this to prepare financially, I am now able to live the way I always wanted to with room to grow.

12. Obtain The Best Types Of Insurance: Learn How To Prepare for Self Employment in 2024

When you’re self-employed, you don’t get benefits such as health and other types of insurance. It’s now your responsibility to find insurance.

The best plan will depend on many factors, such as your age, current state of health. And whether you’re single or have a family or dependents.

It’s important to do your research and find a health insurance plan that meets your needs.

You may also want to consider other types of insurance. As a freelancer or small business owner. There are several types of insurance worth considering to protect yourself and your property.

Any type of business is potentially vulnerable to lawsuits. This is especially a concern if you have a physical business or provide a service that involves working on people’s homes or property.

However, no one is immune to lawsuits and even digital businesses should research insurance possibilities.

13. Set Up Your Business Website, Social Media, and Bank Accounts, Now

Make sure you can hit the ground running by getting everything set up for your new business long before you ever leave your job.

Have your website ready, have all your social media accounts and pages set up, get your business license, open business accounts at your bank and at any stores you will need for products, and so on.

In short, be proactive so that you will be ready on Day One to step out of your old responsibilities and right into your new ones. The more lag time you have between the two, the longer it will take to get some traction.

14. Build Your Freelancing Now

It is important to build up your freelancing before you decide to leave your day job. Of course this doesn’t always work perfectly for everyone, but this is how I’m approaching self-employment.

I have a number in my head for where I would like to be with my freelancing income per month, and I would most definitely prefer to reach that before I make the switch.

I want to build up clients/customers to a point where I 100% believe that I can be successful as a self-employed person.

15. Health Insurance: Learn How To Prepare for Self Employment in 2024

Health insurance will be very expensive, but luckily I’ll be able to hop onto W’s plan once we get married. Also, health insurance can vary widely.

You can get a very cheap plan that pretty much will only be helpful when you are near death and after paying large fees, or you can get something more expensive that will require you to pay less when you visit the doctor.

For me (if I have to pay for my own insurance), since I am still young and never go to the doctor, I will most likely go for something on the cheaper side for monthly payments, and save a heck of a lot of money for any fees and co-payments in a separate medical fund.

16. Various Expenses

For me, luckily I don’t need a lot of expensive machines to do my work. Just a computer and I will be fine. However, before I make the switch, I definitely need to upgrade to a better computer.

The one I currently have is becoming more slow each day, and that is just not efficient when you are self-employed. I would also like to work on furnishing my own office area. Right now, I just work wherever.

17. Diversify Your Work

This doesn’t have to apply to everyone. However, for me, I would like to be as diversified as I can. This way, if something decreases with one of my jobs, then I will have other areas to fall back on.

I am working on adding more side hustles all the time, and the other day added blog management to my list.

I know that most of my work is related to blogs, so I am looking for additional areas as well to expand in. What do YOU do for work?

18. Establish Business Credit: Learn How To Prepare for Self Employment in 2024

As a freelancer, you’re in business for yourself. There are several advantages to establishing business bank accounts and establishing business credit.

Doing so helps you obtain small business loans and other types of financing. Even if you aren’t planning to apply for a loan right now, you may want to at some point.

Business credit can also help you get better terms from suppliers and vendors. There are a few steps to follow when establishing business credit:

• Obtain an employer identification number (EIN), also known as a tax identification number.

• Make sure you have a dedicated address and phone number for your business. If you operate from home, consider renting a virtual office.

• Open up a business checking account. This helps you separate your personal and business expenses, which is useful for taxes as well as keeping your finances in order.

• Apply for a Business Credit Card.

• Use your line of credit consistently but responsibly. Always pay promptly. This will help you build trust and credibility with customers and suppliers and gradually increase your credit limit.

19. Taxes – Don’t Forget About These!

Many of you have asked me if I’m paying taxes. OF COURSE I am paying taxes. I should probably make a post on this as many of you have had questions about self-employment taxes.

I am still new to paying these (outside of what I pay at my office job), as I just started working on my side hustles last year.

It is no fun to have to pay them but it needs to be done. Taxes are paid quarterly and they are expensive.

Taxes need to be put into our budget as well, and I want to budget on the high side so that there are absolutely no surprises.

20. Find The Best Business Structure For Filling Taxes: Learn How To Prepare for Self Employment in 2024

When you have a job, paying taxes if fairly simple. Taxes are withheld, you file, and you either pay what you owe or receive a refund every year. When you’re self-employed, it’s a bit more complicated.

When you become self-employed, the Internal Revenue Service considers you a business. There are actually several types of business structures to choose from.

Most freelancers start off as sole proprietors. If you have employees or partners, on the other hand, it may be advantageous to set up a Partnership, Corporation, or Limited Liability Company (LLC).

If you’re not sure which option works best for you, you should consult with an accountant or tax attorney.

It’s also important to note that as a self-employed individual you should plan to file your taxes quarterly. In fact, not filing quarterly can lead to certain penalties.

21. Simple Tax: The Self-Employed Worker’s Best Friend

Swapping the security of the 9-5 to go into business alone can be an unnerving prospect, and there’s plenty to take into account… but Simple Tax tax software is primed to support you every step of the way.

Designed to help you submit accurate, timely, HMRC-friendly tax reports, our cloud-based tax software helps you to gain an accurate reading of your financial state so that you better prepare.

It will also alert you to liabilities and indicate the expenses you might be able to claim. Playing catch-up with your tax commitments and finances is no fun for anyone.

But when you go self-employed, you’ll realize you simply don’t have the time or resources to journey back through months’ worth of figures and receipts.

Prepare for your solo venture well in advance by registering for a free trial of Simple Tax tax software today, and take advantage of our online system that allows you to update as you go.

22. Loans Will be Harder To Get Approved For: 

It’s no secret, we are looking for a new house. We plan on buying sooner rather than later (before I make the switch), as I don’t have 2 full years of self-employment on the books.

I would hate to make the switch and then not be able to get a home since neither of us have stable income.

I know it is possible to get a home, but I’d rather get the best interest rate and also for the home buying process to be as easy as possible (just like the first time we bought a house).

24. Don’t Burn Bridges

The old television and movie staple of taking your last day to tell everyone how you really feel is not only unnecessary, it’s also a terrible idea.

Your network will always be one of your biggest assets, so make sure that you leave your job with as many connections as possible still intact.

And of course, having those friendly contacts won’t hurt if you ever want or get your old job back, either because the venture didn’t work out, or you sold it, or you just didn’t like it.

Entrepreneurship is not for everybody. Learn How To Prepare for Self Employment in 2024

Do You Want To Be Self Employed?

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Benefits of Being Self Employed

• You are in control. This goes hand in hand with the other 3 reasons above, but it’s the truth. You are in control of what you decide to sell, make, market, advertising, and everything else.
• You get to be your own boss. Don’t like working for other people? Well then be your own boss!
• You get to set your own hours. I don’t know about you, but I am NOT a morning person at all. Being able to set my own hours or start a couple of hours later would be wonderful.
• Your company might be your passion, or something you enjoy doing. I’m assuming that if you start your own business, that it’s not something that you completely hate. It’s either something you like doing, or that you are really good at.

 

Benefits of Being an Employee

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• Vacation, health insurance and other benefits. Yes you have benefits if you are self employed, but the costs will be high. With a position at a company, it will most likely be paid for, or at least some of it will be.
• You will not bring work home with you. Yes, some jobs require you to bring your work phone and work home, but if you are self employed, you will most likely dedicate much more time.
• You enjoy working with other people. If you’re self employed, you will most likely be working by yourself (at least in the beginning). Maybe you like making friends at work and interacting with others. Not saying that you can’t do this when you’re self employed, but you won’t be surrounded by as many people.
• You want steady paychecks. If you are self employed, there might be months (especially when you are first starting out) where your income might not be the greatest. Maybe they’ll never get up to the point where you would like them. With being an employee of someone else, for the most part, you will have stable paychecks.

Do you want to be your own boss, or have a boss?