In 2011, I started a side hustle that would ultimately lead to self-employment. I didn’t know at the time that I would become my own boss one day. But you know how life can be; sometimes the stars align and you end up doing exactly what you were meant to be doing all along.
And it didn’t take me long to figure out I was, in fact, in the ideal career for my personality and talents. So, after a successful year of part-time work, I quit my steady professional job in 2012 to begin a career as a blogger and online content creator.
Since those early days, my husband has come home to work with me, our profits have grown, and our business dealings (and taxes) have become a lot more complex. Where I was once a novice at all things self-employment, I feel like I finally know what I’m doing.
Of course, most of our biggest lessons were learned the hard way — by messing things up and figuring out how to fix them. I also learned a ton about what not to do just by realizing my own mistakes.
Here are some of the lessons I’ve learned about self-employment, and why I don’t think I could ever go back to my old life. (See also: 6 Moves Every First Year Freelancer Should Make)
1. With self-employment, you reap what you sow
At my old office job, there were days when I would sit and stare at the clock for hours, counting down to 5 p.m. so I could leave. Even when there wasn’t enough work to fill my day, I still got paid for being there.
But self-employment is an entirely different animal. When you work for yourself, slacking off means taking money from your own pocket. When you run out the clock or don’t do your best, you’re only hurting yourself. You don’t get paid for showing up (not to mention vacations and sick days!), nor will you automatically get a salary bump each year or be in line for a promotion. You have to reach for your potential on your own — grow your skills, raise your rate, and land your clients.
Once I became self-employed, I realized that I was the one in charge of my own destiny. If I wanted full-time results, I had to put in everything I had. So that’s exactly what I’ve learned to do. (See also: Day Job or Freelance: Which Is Right for You?)
2. You can’t avoid taxes, so you might as well plan for them
Paying taxes as an employee isn’t that painful. Although you can see how much is withheld from each paycheck you receive, the money is gone before you really see it. And as long as you set your withholdings up the right way, you shouldn’t owe too much money come April 15.
But self-employment taxes can really hurt, and they start hurting even more as your income grows. Since you don’t have money withheld from your paycheck, you have to make a payment each quarter for estimated taxes.
I hate writing those checks every three months, but it’s a lot easier to handle when you have the money already set aside. Over time, I’ve learned to set aside around 30 percent of my income as I earn it so I’m ready to pay my tax bill when the time comes. (See also: How to Budget Consistently Without a Steady Paycheck)
3. Living below your means is the best way to deal with an unpredictable income
While we always earn more than enough money to pay our bills each month, our monthly income often fluctuates by thousands of dollars. This is an inevitable part of self-employment, but it’s one I’ve gotten used to.
Since I hate owing money or feeling like I don’t have enough, I decided early on in self-employment that I wanted to keep our bills as low as possible. As a result, we live well below our means. We don’t have any credit card debt, we don’t have any expensive hobbies or toys, and our house payment is less than 10 percent of our gross income. Even though we could afford to live a little more lavishly, I’ve found the peace of mind that comes with living below our means is well worth it. (See also: 6 Moves Every First Year Freelancer Should Make)
4. When it comes to health care, you’re on your own
One of the biggest drawbacks of self-employment is the fact you don’t have any benefits unless you buy them. This means buying your own health insurance plan, purchasing your own life insurance, and paying all your dental bills out-of-pocket. (See also: How the Self Employed Can Cut Health Care Costs)
While health care has always been a struggle, we are finally at a place where we’re happy with what we have. We have tried a few different plans over the years, but we ultimately ended up in a health care sharing ministry called Liberty Healthshare after the Affordable Care Act was passed.
In terms of dental care, our local dentist offers a $799 per year for a family plan that includes two cleanings with X-rays for all of us plus a 20 percent discount on dental work.
None of this is ideal, but it’s the price we pay for self-employment and something we’ve had to get used to. (See also: 10 Work Perks You Can’t Get as a Freelancer)
5. Saving for retirement is not that hard
A lot of people assume that health care and retirement are the biggest issues facing the self-employed. Personally, I’ve found that, while dealing with health care is a pain, retirement planning is a breeze.
You don’t need to have an employer to set up a retirement plan. We set up our own SEP IRA and Roth IRA plans with Vanguard when we first got started, but have since transitioned to Solo 401(k) plans instead. Either way, Vanguard funds are some of the least expensive available, and you can find all kinds of resources online to help you choose the right funds. When in doubt, you can even buy target date funds that automatically adjust for risk based on the year you want to retire. (See also: A Simple Guide to Retirement Plans for the Self-Employed)
6. You have to set limits on yourself
When you work a nine-to-five job, you can leave your work at the office and enjoy your free time at home. When your work is at home, on the other hand, it can be very challenging to separate your personal time from your work time. If you’re not careful, you end up working all the time.
I’ve fallen into the habit of working 50-hour weeks several times over the years, but I try really hard not to. These last few years, I have tried to work only when my kids are in school, or during the hours of 8 a.m. to 3:40 p.m. Once they get home, I put my computer away to do housework and spend time being a mom. It doesn’t always work out that way, but I have a much better work-life balance when I set clear limits for myself. (See also: The 5 Biggest Mistakes People Make When Working From Home)
7. Freedom is better than PTO
If I had a dollar for each time a person asked me if I missed having paid time off, I would be rich! For some reason, people assume that not having paid vacation is a huge drawback of self-employment.
While it may be a downside for some people, I am more than happy to forgo paid vacation in order to set my own hours and work when I want. With the freedom to make my own schedule, I can work ahead any time I take a trip. And I never have to ask permission, either.
At the end of the day, I value freedom over paid vacation and sick days — even if that means working during vacation or having fewer days off each year. (See also: Freelance Your Way to More Income and Flexibility)
8. I wouldn’t trade self-employment for the world
The final lesson I’ve learned from self-employment is that, for me, this was a one-way street. Even though self-employment isn’t perfect, I couldn’t imagine going back to a regular job now.
I truly enjoy the challenge of figuring out how to earn a living without a steady salary. I am used to putting my head down and working hard to achieve my goals without having to make small talk or drive to an office. And I love the fact I can earn more money by working harder, instead of relying on someone else to determine how much money I make. Even though my income varies widely and I don’t have any benefits, I have something more important — real freedom to live my life how I want.
No job is perfect, and that’s certainly true when you work for yourself. But self-employment lets me bet on myself every day of the week — and it doesn’t get any better than that. (See also: 8 Signs the 9-to-5 IS Right for You)