Beware the costs of self-employment

More and more, we see an entrepreneurial spirit rising up. Small businesses and online shops are becoming a mainstream way to shop, rewarding the efforts of dreamers who have dedicated their lives to their work. But it’s more than just hard work that goes into a successful business — it’s funding. Here are some of the costs to factor in when you’re considering chasing your dream full time.

Non-billable hours

The definition of non-billable hours — the time you spent organizing, prepping, checking emails, building relationships — also become nonpaid hours. In a traditionally established business, you have the luxury of getting paid 8 to 5, whether that time is used to check emails, get a snack, or do the hard work. However, any moment that’s not production in your self-employment is time that’s not making you any money.

Clothing and transportation

Most likely, you’ll save on clothes and transportation when you work for yourself. Unless you’re operating from a coworking space, your “commute” may become walking down the hall to your home office, saving you a bundle on gasoline and car maintenance. No one in your home office will judge you for wearing sweatpants, either, so you won’t have to shell out more money for daily professional outfits — but still invest some into a small set of business acquisition outfits.

Benefits

Obviously, when you’re the only one employed, there are no higher ups taking the brunt of the nitty-gritty expenses, like health insurance, paid time off, incentives, bonuses or surprise doughnuts. While these things will be more expensive or totally obsolete, there are still benefits you can reap. For instance, the self-employed qualify for government-sanctioned retirement savings plans that have looser contribution limits than those typically provided by an employer other than yourself.

Employment taxes

You’ll be responsible for all your taxes, compared to a typical 50 percent covered by an employer; however you will also be able to write off more. Business lunches, possibly transportation to and from meetings, materials and equipment for your home office — these are all opportunities to get money back when it comes time. Consult a tax expert for the ins and outs but especially if you’re just getting started, take the time to find out all the expenses you can write off.

Everything you do as your own boss can be seen as an investment toward a future with clients who trust you and a workflow that is effective and tailored to you. The first years will most likely be financially strapped, but the long-term payoff and pride have the potential to be life-changing for a dedicated dream chaser.