This post is by our regular Wednesday contributor, Erin.
So, you want to be self-employed and “live the dream” of being your own boss?
Awesome! …But hold up just a second.
Working for yourself may sound like a dream, but the reality is much harsher than you might expect.
I would know – I went into it pretty blindly about a year ago, and if it hadn’t been for my network, I’m pretty sure I would have completely failed.
The worst thing you can do for yourself and your business is be unprepared. So here’s a list of things you need to consider before becoming self-employed and jumping ship, straight from my own experiences.
1) You’re 100% Responsible
When you work for yourself, you do everything: marketing, invoicing, creating a product, delivering on your promises, and networking.
Which also means you take on all the responsibility. If something goes wrong with a client, you need to own up to it and figure out how to rectify the situation.
If you’ve never been in a management position before, this might be a little new to you. It’s important to be professional and friendly. You are your business!
No one is perfect and you’ll make mistakes, especially in the beginning as you learn. That’s okay – just be prepared for not having any scapegoat, and make sure you get things in writing in case a client misunderstands you.
2) It Can Be Lonely
Depending on the type of work you do, self-employment can be a lonely journey.
I’m an introvert, and there are times I’ve thought self-employment has only enabled that. I’m the kind of person that needs to be forced out of my comfort zone when it comes to social situations.
For that reason. while I definitely don’t miss having a commute, I do miss the office camaraderie. I was lucky to have decent coworkers I enjoyed talking to at my last two jobs.
If you love social interaction, you might want to develop a network of other self-employed individuals nearby. Meet at a coffee shop every so often to catch up and work.
There are also co-working spaces on the rise, which allows you to get that office feel while still working for yourself.
3) You Need a Financial Backup Plan
When I made the jump to self-employment, I did so without having any money coming in. Under most circumstances, I wouldn’t recommend that! I took a giant leap of faith, but not without having a financial backup plan or two.
First, I saved like crazy in the months leading up to our relocation. I had a five-figure emergency fund, and I wouldn’t have been able to make the switch without it.
Having that money – knowing we were covered just in case – allowed me to sleep a lot better at night. I also didn’t feel like I had to pursue super low-paying jobs just to pay the bills.
Second, I put together a bare bones budget of just the necessities, in case it came to that. Luckily, the underlying purpose of the move was to lower living expenses, so being able to afford the basics wasn’t a problem, especially with the savings I had built up.
Lastly, I knew if times got really tough, I could rely on my parents. They live a few hours away and while it would have been inconvenient, it was a lot better than the alternative.
Notice how none of these plans involved getting into debt. I don’t believe that’s 100% necessary for self-employment. Try and work as hard as possible to get your business off the ground while you’re still working full-time.
4) You Need a Strong Network
I would absolutely not be where I am today without the support of my clients and my friends. Besides needing a strong network for opportunities, you also need to get out of any selfish mindset you might have.
Being self-employed doesn’t mean “one for all and all for one.” Very much the opposite, at least in our personal finance community.
Now that I’ve grown my client base, I’m always happy to pass along any work I can’t take to other freelancers who need it. After all the amazing opportunities that were given to me, there’s no way I can’t not pay it forward.
What goes around comes around. People remember when you’re willing to lend a hand, and they remember when you’re not.
5) You Can’t Be Afraid of Failure
When you’re self-employed, failure is your friend for many reasons, mostly because it’s going to be a constant companion for a while.
No businesses, small or large, were started in a day. And they’re always evolving. That’s how you need to see your business, too.
Every time you fail you discover another direction you should take. You’re not remaining stagnant. It’s a sign of growth.
Yes, failure is frustrating, but you can’t stay in that mindset forever. You’ll end up feeling sorry for yourself and get off track with what you set out to do in the first place.
Any time you fail, figure out why you did, and change it. There are no magical secret recipes for success out there, except for the fact you need to fail in order to succeed.
Self-Employment is Empowering, but It’s Far From Easy
I would never want to deter someone from following their dreams. But your dreams should contain a healthy dose of realism.
There are a lot of amazing success stories out there. I was inspired to switch to self-employment because I saw many of my peers making the jump and getting ahead of where they used to be.
However, it’s certainly not all sunshine and roses, as you can tell. It’s a challenge, and it’s not for everyone. I thought my “office” work ethic would translate over flawlessly, but being your own boss and running the ship is very different from working remotely for someone else.
The worst thing you can do is romanticize the idea of quitting your job. If you hate where you’re at in your career right now, it might feel amazing to walk out and kiss your job goodbye. But the grass isn’t always greener, no matter what you want to think.
_______________
I don’t regret making the jump. I’ve learned a lot more than I ever thought I would, but it isn’t for everyone. Please consider how it’s going to affect all aspects of your life – from your finances, to your family, to your social life.
The best thing you can do? Find someone doing what you want to do, and ask them if they can spare a moment to talk about their experience. It will give you a lot of insight!
Is self-employment something you’re striving for? If you are self-employed, was it always a goal of yours, or did you “fall” into it? What’s your advice for others looking to switch?
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All great points Erin! I quit my job three years ago Monday and am not planning on looking back anytime soon. It had always been a goal of mine, though it’s interesting what you learn about yourself while working for yourself. The big thing I’ve learned lines right up with your #2 – I’m more of an introvert and thought it wouldn’t bother me as much as it does at times.
These are definitely great points. I didn’t necessarily aim for self-employment – it’s just something that happened to me. It’s ideal for my personality and work ethic, however. I hope I never have to work for anyone else again.
I love this post, Erin!! So true!! My husband and I are both now self-employed. Like you, we have a large emergency fund that has us covered and allows us to sleep at night in case things are slow. Thankfully, we’ve never had to go into it other than when we first moved from AZ to NC.
We love being self-employed, we really do. We control our income, we are our own boss and the best part is life feels totally in our control.
That being said, my husband and I both have interviews for FT positions this week. Mine would be from home, so I think I’d still feel self-employed and I could still freelance (even with freelancing, we’re still technically “employed” by our client, haha). My husband’s would be a regular M-F office position. We’re not certain he’ll take it (assuming it’s even offered to him), but at this point we want to know our options. The one HUGE HUGE downside of self-employment is qualifying for a home loan. We’re at the point where we want to buy…but we can’t. We can wait the 2 years until we have our self-employment tax returns, but even then it is HARD to qualify when both people are self-employed.
Anyways, I’m rambling. I hope you are doing well, Erin!! :)
Yes I fell into it without warning, so it was sink or swim. I would say preparation is key. Too many people just jump into it without loads of prep to make the transition easier.
Great points. I often dream about being self-employed but I think the grass is often greener on the other side. I focus on the flexibility and being my own boss, but there are downsides of being self-employed as well. Of course if you are prepared and have a plan then things will go better. My job is extra hard to leave because of all the benefits like health insurance, pension, steady pay, etc. Plus, I have yet to find a business I could start that could come close to replacing my salary.
I am aiming now for self employment so these are all great points. I am just one of the lucky ones for I will have my military pension for the rest of my life as my back-up insurance. Still I am looking forward to working for myself and enjoying more of my life.
I would love to be self employed at some point. I tend to be a bit conservative and have two kiddos at home that I need to provide for. It makes it difficult to leave a steady paycheck. Maybe someday I’ll find that great opportunity that will give me the courage to venture out.
Mr. Budgets goal is for self employment. Our goal is too have enough money saved and invested before he does so, so that we aren’t stressed during any down times. I’ll still be working so that takes some pressure off. Still a few more years away though.
FrugalRules You really do learn so much more about yourself when you’re self-employed. I thought I would love being off on my own, as even in school, I didn’t like group projects. ;) Funny how it works!
Holly at ClubThrifty It’s so interesting to me that many of us kind of “fell” into it from side hustling. I never had self-employment on my radar, but it has offered me more opportunities than I ever had before.
Sarah Brooks Oh wow, exciting news Sarah! Good luck to both of you! I think if I ever went back to “traditional” employment, I would want to work from home as well. The flexibility is so nice. You’re right that buying a home is incredibly difficult (and different) when you’re self-employed. That’s one thing I do worry about, even with renting and possibly getting a new-to-us car soon, as my income last year wasn’t the best.
Beachbudget Definitely agree with you, especially after my experience. It’s still possible, but having even just a little taste of what to expect is worth it.
Andrew LivingRichCheaply There’s nothing wrong with side hustling, either! Gives you the best of both worlds. There are pros and cons for every situation, and I don’t think self-employment is for everyone. If people ever ask me about it, I always tell them the downsides and the upsides.
Petrish @ Debt Free Martini Having a backup plan is so important, and I think it helps give you even more confidence to explore what you want to do. I wouldn’t have been able to take the “risks” I did when I started freelancing if I hadn’t had my emergency fund in place.
Financial Tour Guide It’s hard to adjust to a different pay schedule! I was very lucky my fiance was bringing home the steady paycheck so I didn’t feel as fearful about it, but if I was single, that would be a different story.
mrandmrsbudgets That sounds like a great plan and similar to what we did. Our savings + my fiance’s income made it so we were never put in a rough spot. You also never want to feel like to have to take work on – especially if it’s not in line with what you want to do.
Eventually I plan on jumping into self-employment, but it will be in something I enjoy and am passionate about. Most likely just a means to supplement my financial independence and not a means to support 100% of my expenses.
Great post Erin! Self employment is something I would like to strive for eventually but like you said, it’s really important to get financially prepared first. I’m fine with my current job, but I do love freelancing more and I’d like to have the savings, financial stability, and support to walk away one day if I wanted to.
Yes, on the network. I can’t believe how hard it is to break into freelancing and how many pitches you send out in the beginning, only to hear crickets. Now that I am actively working toward self employment (it’s happening, soon!) I see only too well that a network is a hard thing to build when you are rushed.
ferventfinance I like that distinction! I would like to do something similar for when I reach financial independence.
Chonce It’s always good to have the option, just in case! I’d be lying if I said I wasn’t jealous of people who liked their jobs. I haven’t had the best time finding one for me in the past, and there are definitely times when I feel like working for someone else is easier!
indebtedmom Yay! You’re right, though – when it comes to just about anything, it’s who you know, but that’s so much more true when you’re self-employed. I’m glad there are so many helpful communities out there just for freelancers.
I’m definitely shooting for self employment. Its a few years down the road for me though. The main thing that I’m doing right now is attacking this debt.
I fell into self employment years ago. It was great in a sense, but I had several employees that drove me bonkers over the years. Now my self employment consists of being in charge of only myself and I enjoy that type of employment much better!
Jason @ The Butler Journal It’s always good to be thinking long-term!
Eyesonthedollar I think I would, too. I’ve never seen myself in a management position, and I can’t even begin to think about the pressure of having to fire someone!
It can be SO lonely. I’ve been forcing myself to schedule lunches and events so that I actually stay in touch with the outside world. haha
I had a week off of work where I actually blogged from home and was very surprised at how lonely I was. I am a social person and didn’t realize how much I really value the time with other people during the work day.
brokeandbeau I don’t blame you at all! That’s something I’ve been thinking about doing.
Financegirl I never expected to be so affected by it, especially since I like to stay away from office politics and drama. But I do miss having other people around, especially to bounce ideas off of.
I’m self-employed and find all of these to be completely true!! Especially the lonely part. I didn’t realize how much I’d miss that aspect of working in an office environment!
Christina@EmbracingSimple I’m glad I’m not alone there! I definitely don’t miss having to take phone calls, but I do miss the random breaks to chat and the company outings that used to take place.
Great stuff, Erin. All of your tips are great but I think the idea of having financial backup is the most important. It can be very stressful venturing out on your own and dealing with financial stress right from the start will make it much worse!
-Ricky
debthelpercom Agreed! Having savings really helped make the transition less stressful for me.