What it means to be self-employed
Being self-employed means working for yourself and earning income by contracting directly with a business, rather than working for a specific employer who pays you a regular salary.
Types of self-employment include:
- Independent contractors – Anyone who is in business for themselves, including freelancers and gig workers
- Sole proprietors who own their own unincorporated business or 2 or more partners who create a business together
Advantages of self-employment
- Powerful feeling of being “your own boss”
- Opportunity to work at what you’re passionate about
- You manage your work schedule, choose your projects and workload
- You have more control over your earning potential
Downsides of self-employment
- You have to manage your own income taxes rather than have them deducted from your salary by an employer. This takes discipline to regularly save a portion of your earnings to pay taxes and keep track of your expenses.
- You don’t receive paid vacation or sick days.
- Your income may not be as consistent as a salary. It may go up and down with the amount of work you have.
- You won’t have health and dental benefits unless you purchase your own.
- You’ll be responsible for own retirement savings, rather than relying on a group savings plan or a registered pension plan.
- You’ll be responsible following up on creditors who may be late paying you.
Steps to take before becoming self-employed
- Create an emergency fund – It may take a while to get your self-employment gig off the ground, so you should have saved enough money for 3 to 6 months of expenses. This fund can also provide financial security in case a creditor delays paying you.
- Start your new venture in your spare time– Find out how whether you’re cut out to work for yourself and start building your network of client.
- Create a workspace – It’s important to have a dedicated workspace so you can concentrate and create work-life balance when you’re not working.
Signs you’re ready to become self-employed
- You want more flexibility and to create your own schedule.
- You want more control over your work or feel your ideas are being overlooked.
- What you’re passionate about isn’t what you’re working at now.
- You have a support system of friends and family who understand your decision and encourage you.
- You’re disciplined and take initiative.
- You’re able to separate your work life and private life to help avoid burn out.
- You’re resourceful and don’t mind wearing many hats and solving your own financial, technical and business problems.