Home » Finance » Moves to Consider Before Leaping to Self Employment

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Are you ready to make the leap to self-employment?  If you are considering quitting your day job to work for yourself, you may be both excited and nervous.  While you may be sick of your job and can’t wait to leave, it is prudent to carefully plan for the financial instability self-employment may bring.

There are a number of aspects of your financial life that you should reevaluate before you make the big leap:

Emergency fund.  How large is your emergency fund?  Self-employment typically comes with erratic income.  One month you may make double what you did the month before, and the next month you may not have enough money to pay your basic bills.  A 6 to 8 month emergency fund (or more) can help you handle erratic income.

Mortgage.  If you are planning to buy a home in the near future and have some money set aside for the home purchase, you may want to buy it now, before you become self-employed  because home loans are difficult for the self-employed to obtain.  You can use online mortgage calculators to help you determine the monthly mortgage payment you can afford.  If you do decide to buy a home before moving to self-employment, make sure you leave yourself an ample emergency fund to cushion yourself against variable income.

Health insurance.  One of the largest expenses of being self-employed is health insurance.  If you have a spouse with health insurance, it may be wise to join that policy.  If not, you should have the option of COBRA insurance for up to 18 months from the employer you are leaving, but those policies can be expensive.  You can also apply for independent health insurance, which may be more reasonable depending on your age and health.  A good health insurance broker can help you consider different policies and premiums.

Business contacts.  Ideally, before making the leap to self-employment, you have been working nights and weekends to build up your business and clientele.  Many experts recommend that you have your side business bring in a significant amount of income before you make the leap to working on your own.  Business contacts are also important as they will help you grow your business when you are self-employed.  They can also help you find the social contact you may miss when you leave your day job and work independently.

Contemplating working on your own is exciting.  However, there are many benefits your day job provides such as health insurance, that you must put in place before you quit.  In addition, make sure you are in a healthy financial state so you can weather ebbs in income.

12 Comments

  1. Rochelle Harrison says:

    I agree with you that we need to consider some situation before we leap our employment so that we will not suffer regret in the end.

  2. lariane says:

    We need to consider some situation before we leap our employment. Thanks for the usable blog..

  3. Kathryn says:

    Employment is important and choosing our career should be considered as well.. Thanks anyway for the information here..

  4. Rochelle says:

    Studies have found that self employed people work twice as many hours as those traditionally employed. With that in mind, here is how to become self employed..

  5. ivf says:

    I’ve looking for some post. . .and this post was exactly in my mind and I believe that this post will help others in our job. Thanks a lot!

  6. It really is a great risk to suddenly jump from an office job with a company to self-employment. I agree that all you said in your post is true, and people must consider things like emergency funds, mortgage, health insurance and business contacts if they really are serious in getting to being self-employed. Other people do not see that they can work as self-employed, as they fear they won’t have any benefits to receive that are usually given by companies such as health insurance, pension, vacation leaves, holiday bonuses, etc.

  7. Faye says:

    I wish I had read this before I jump into my quick decision. 🙁

  8. Rochell Harrison says:

    Their are really lot to consider before we can decide if we really want to be self employed and work for your own. Thanks for this nice post.

  9. Taylor says:

    I guess Self employed people work more compared to the typical employed guys, I agree with you that we need to consider some situation before we leap our employment so that we will not regret in the future, your tips are wonderful and will help out many, thanks a ton for sharing.

  10. Clark says:

    Most of the things you said are actually very true, people must consider things like emergency funds, mortgage, health insurance and business contacts if they really are serious in getting to being self-employed. There are many benefits too, being self-employed, no boss, no rules to follow LOL etc.

  11. Jenny says:

    Self employment, I can consider it as a risk but many benefits are there too like More money, freedom, ownership etc. I agree with you that we need to consider some situation before we leap our employment so that we will not regret in the future.

  12. Hank @ COBRA Insurance Direct
    Twitter: cobradirect
    says:

    In my opinion, health insurance should really be a number one priority for anyone with a preexisting condition. COBRA can be an option but it is incredibly expensive and medical bills will drown you if you don’t have any coverage.

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