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Considering Self Employment? Answer these Financial Questions

As you sit in your office (or cube), you may begin to ponder what it would be like to work for yourself. The benefits of self employment run deep, however, working for yourself is not all fun and games. There are many details to consider, including those associated with your financial situation.

As you consider self employment, here are five financial questions to address as soon as possible:

1. Can you afford to leave your current job? Remember, you are trading in a guaranteed paycheck for uncertainty. If you don’t have the stomach to deal with this, month in and month out, it may be best to stick with your current position for the time being.

2. Do you have money in the bank? Since your income is likely to fluctuate early in your career as a self employed professional, the more money you have in the bank the better off you are going to be. While you don’t want to find yourself using this money often, it is nice to know that it is available to you.

3. How much can you reasonably earn in your new career? This is no time to lie to yourself, but instead a time to be 100 percent honest. Do your research online and speak with others in the industry to get a better idea of how much you can expect to earn.

Note: just because others in your industry earn a particular amount doesn’t mean you will be able to reach their level right away.

4. What are you going to do about benefits? For example, once you take the leap into self employment you are responsible for purchasing your own health insurance.

From buying your own policy to obtaining coverage through your spouse’s plan, you have options. Just make sure you look at the big picture to ensure that you can comfortably replace all the benefits you are receiving from your current employer.

5. What is your plan for retirement? As a traditional employee, you likely have access to a retirement plan, such as a 401k. Additionally, some employers will contribute to your retirement account along with anything you add.

When you work as a self employed professional, all this goes out the window. You and you alone are now responsible for saving for retirement.

If you are considering self employment, answering these financial questions can go a long way in helping you make a confident decision on which direction to take your career.
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Tuesday, 23 April 2019