Working for yourself, especially over the Internet, brings a real sense of freedom to your life. No boss looking over your shoulder. Getting up when you want and working the hours of your choice. You can even get it all done in your jammies if you want.
But striking out on your own does come with its own set of financial risks. There’s a reason people tend to shake their finger at people like us and warn about throwing away the “security of a real job.” That so-called security is certainly debatable, but if you don’t at least take care of these crucial financial responsibilities it’s hard to deny that your naysayers might just have a point.
1. Paying Your Taxes
It can be tempting to wait until you’ve “made it” before you start getting caught up on your tax obligations, but this is a big mistake. Just like anyone else responsible for their own paycheck, you’re considered either a small business or self-employed individual, and that comes with tax obligations.
Don’t think it’ll ever catch up with you? Aside from the ethics of avoiding taxes, don’t forget that every penny you make is 100% traceable when it’s made on the Internet. To certain interested parties, online privacy doesn’t exist.
Best to figure out what tax bracket you are in and shovel the proper percentage of money into that account each month so you’re prepared when tax times comes around.
Record your expenses too though. Everything you buy for your online business – from domain names to webinar training to your laptop – may represent a possible tax write-off.
Of course, don’t take my advice for it, as I’m certainly no tax professional; speak with a competent authority on the matter.
2. Putting Together a Safety Cushion
Everyone should have at least a 3-month safety cushion set aside in case something happens to them and they’re suddenly out of work. It doesn’t need to be a ton of money – just be enough to cover your basic lifestyle, keep a roof over your head, and put food on the table until you can figure out an alternative solution.
For no one is this emergency fund more important than someone who makes a living online, as your income is much more volatile than the average person’s. Any change in your industry, Google update, or changing technology has the potential to knock wipe the income right out from under your feet.
For that reason, I recommend making it a goal to save enough to keep you stable for 6 months to a year, just in case.
3. Maintaining Adequate Health Insurance
This is another area where the self-employed often cuts corners, but it’s a big mistake. Health insurance is one of your most crucial expenses, and you don’t want to put that comprehension off until after disaster strikes.
If you’re reasonably young and healthy, health insurance doesn’t cost that much money. Cut down a couple other expenses if needed and make it a priority.
4. Saving for Retirement
Here’s another area where you are seriously vulnerable if running a business online. Nobody is setting aside retirement money for you – you need to take care of this yourself. Don’t just count on being rich someday and figuring it out when the time comes.
You may not have a 401K at your disposal, but you can set up a Roth IRA, and it’s well worth it. Book a one-time appointment with a trusted financial advisor to see what other options are at your disposal.
My point is that if you’re going to embrace the freedom that comes with working for yourself over the Internet, don’t trade your future security to have that freedom. It may not be worth the swap, and the last thing you want to do is look back someday on your decision with regret.Take it seriously and you don’t have to.