Self employeed peoples

[Mr.Macinstache]

Are there many of us here? Lets share stories, thoughts, strategies and idea's here.

I jumped ship from a company that was going down fast. I went from a nice salary to being self employed, while my wife was pregnant. That was years ago, I still freelance graphic design and am surviving.

How do you all deal with challenges of self employment? Some days are hard to get motivated when the work is light. I find myself drifting into semi-retirement mode. Also, there is budgeting. Since there is no steady paycheck, its hard to outline a budget. Usually its feast then famine around here, so there is that. We usually just live as frugal as possible and when there is a windfall, add it to our EF after bills.

So what say you?

[daverobev]

Yup. I work for companies/friends back in the UK, who I used to be employed by, but now freelance. I'm lucky in that the work I got paid off my old house in the UK so I'm pretty much covered... but there are still dribs and drabs of work to do. I should really cut the cord completely and get on with my 'new life' but I find it hard to turn down money...

I agree with budgeting being hard. My wife brings a salary plus she freelances too on the side. She's on maternity leave from next month so our household income is going to be significantly less. But honestly - it's ok, we have enough.

Motivation, oh man. Yup. I just. Don't. Care :) Rather be reading a book :P

[Joshin]

I've been full time self-employed since 2009, but I have been dabbling in my own business since I graduated college in 2001. I'm a writer, so no employees and I fall on the freelancing side of the self-employment spectrum. Hubs is an extremely part time artist, preferring to mainly do the work he loves but that doesn't pay, or donating work. He is much more "retired" than I am.

Some months I feel semi-retired, others I feel like a slave to my keyboard.  In truth, I'm not retired at all because we haven't hit our magic number yet, but we should in a few more years. Luckily, my work is pretty steady so my monthly income is pretty reliable, which helps with budgeting. We still run the budget 60 days out, so if I do have a slow month we have time to adjust our spending without slowing down savings -- or even worse -- drawing on savings.

I guess I'm one of those super motivated people, but only to an extent. I have a billion interests and work is just one of them. I type fast and only require minimal editing, and I'm a crazy morning person, so I usually get a day's worth of work done in a few hours. I'm a list maker and a list achiever, so I always have something to keep me busy for the four hours or so I have marked off for working each day. If I have a lot of clients needing stuff at the same time, though, I get chained to my desk and burnout hits, resulting in several weeks of no motivation. I could get more clients, write more for content mills, or send out more queries, but I'm not motivated enough by the money to give up my other hobbies/interests/responsibilities to make time for it.

[citrine]

I have my own Massage Therapy practice and work 10-15 hrs a week.  I usually have one day where I do nothing.  Motivation is hard especially during the cold weather where all I want to do is read a book!  I try and cook a new dish every week and take care of the homestead while DH works a normal job.

[Norrie]

My dh is self-employed, and always has been.

Budgeting used to be hard until we figured out what we absolutely had to have each month. Then we subtract my income, and see what we need from him. And then we stash three months' worth of his salary in what Dave Ramsey calls a hills and valleys fund (just a separate bank account tied to our main checking). Example, with completely fake numbers:

Required monthly: $3,500
My monthly income: 1,500
Dh needs to bring in: 2,000

So we would keep $6,000 in our hills and valleys fund. Some months he makes much more than $2,000, and as long as we've got $6,000 in the H/V account, we put the rest towards paying off our mortgage or savings or whatever. Some months he may make $1,000, which means that we need to draw the remaining $1,000 from the H/V account.

This way we know with 100% accuracy how much we'll have to spend on regular budget items each month, and the only unknown is how much extra (if any) we'll have to throw at the mortgage, taxes, or savings/investing. In our experience, as long as you know that your regular monthly budget is covered, it's not stressful if the other stuff varies. We like having the three month buffer, because we never quite know when his income will spike again (record labels and show promoters all pay on different schedules).

So that's how we deal with that side of things. I had started to feel resentful of the stress that his varying income brought, because I'm the one who pays the monthly bills. This has worked out really well.

In terms of motivation, I don't know how he does it. He just loves to work. He does take about one week a year to lie on the sofa and re-read the entire Harry Potter series, and he does travel a lot too.
I'm hoping to work from home within the next few years, and the motivation piece is the biggest worry that I have.

[frompa]

Thanks for posting this; it's a fine topic. I'm self employed, too, have been for many years.  I'd say after the initial challenge of taking the plunge and getting myself up and running, which took maybe two or three years, the next big challenge was learning that by setting really big and specific financial goals, I made more money.  It's the nature of my employment that sometimes I have little income for a few months, and then I have more money than I know what to do with.  So I learned the value of budgeting, and setting my lifestyle by the lean times so that the fat times could feed savings and long term financial goals.  And I found that being financially adept at getting by on little gave me a lot of leeway when the life-in-general shit hit the fan a few years ago and interfered with my ability to work at all for a good two years (child suddenly very ill, unexpected death in family, mother's unexpected illness, and then, to top off that fine year, a completely out of the blue divorce.. it was like a country western song.)  I have always appreciated the flexibility of being self-employed, even though it's true that the downside is, if I don't work, I don't get paid.  And sometimes being able to get by on little has allowed me to be satisfied with making too little.  I'd say not everyone's cut out for self-employment, but I am.  I also think that being on the front line of the financial obligations -- like being responsible for budgeting my quarterly tax obligations, for riding out the lean times, for securing my own health insurance and setting up my own retirement scheme over the years, has given me a financial leg up on many people who never have to think about these things (or at least THINK they never have to think about them, and then when they do, they FREAK OUT.)  I'd be curious to know, what do you find are your biggest challenges as a self employed person?

[Freedom2016]

Great thread! I've been effectively self-employed since 2008 and know the "feast or famine" cycle very well. It's taken an embarrassingly long time to get my cash flow under control, but now, instead of paying myself only after clients pay (and at varying amounts), I take one monthly draw based on what we need to live on each month - no more, no less. By now I have built enough of a cushion in my business account that we can float the lean months.

I have also started 'withholding' taxes on myself - putting a percentage aside as soon as it comes through my business's door - rather than what I was doing before, which was trying to remember to put aside a percent from my varying distributions. (This always got hard to do in feast-or-famine mode; there always seemed to be some reason I couldn't/didn't put aside my quarterly tax amount and then each quarter I would scramble to send in the right amount.)

[iamlindoro]

I've been self employed for all but a month of this year.  In my lowest moments, I've been scrambling to find work for someone else again.  In my most triumphant moments, I've been giving serious consideration to staying self employed. 

I do Software Development (in addition to a number of other things-- I've also been a Director of IT) and for the last couple of years my side hustle has been mobile (iOS) development.  Last year I ended up with a 20 hr/week side gig that I mostly did in the early mornings and evenings.  It really saved my bacon when my last company went under.  That and a small amount of income from my own app store apps has saved my bacon this year, and this month I ended up with a very nice 40 hr/week consulting gig.  I'm officially covered for the rest of the year and there's a better than even chance that the new gig will turn into a long term consulting arrangement.  If that happens, I'll probably go all in, keep working 12 hour days and hustling to keep work coming in.

Since I can keep my own overhead extremely low by only paying for the benefits that I need, and the personal 401k would let me supercharge the hell out of my contributions by playing both employee and employer to the tune of $55K a year, if I can keep the work coming in then I'm hoping to keep it going.  As others have mentioned, it's feast or famine but I think I'm well regarded by my clients and that will produce more work going forward.

[iamlindoro]

And I guess I would add that if I could keep enough work coming in, moving to a very low cost of living area (My current contracts are all work from home, with companies in the SF Bay Area and NYC, with accompanying hourly rates) and raking it in sounds pretty darn appealing.

[Insanity]

The second half of this year has been a whirlwind.  I got laid off in July but work in a high demand field (software security).  Mainly there was confusion over travel ability.  I miss the people I worked with.  I liked it a lot. 

I accepted a contract to hire job shortly after that and also accepted a corp to corp.  There are some apps I want to develop on the side, but haven't had a chance. Both are in security, but different aspects of it.  The contract-to-hire wanted to convert me in September, but never came through so I accepted the corp to corp.  The contract to hire was supposed to be a 3 month contract (turned out it was worded as a three month engagement with the client), and I told the contracting company that I want to go corp-to-corp.   Now, the new manager of the team for the contract to hire wants me to come on full time.  I told him flat out I'm going to work both.  He said as long as the work gets done, he doesn't care.  I also told him I won't sign a non-compete (which are pretty worthless anyway).  I have a feeling they don't want to do a corp-to-corp contractor and that's why this went through.

I just gotta figure out if maxing out at the full time job (if the offer comes through) is worth it or if maxing everything out on the self employed side is better tax wise.    I keep thinking if I can run both jobs or the year of the corp-to-corp, I could make a killing.  Heck, even if I only make it through the end of the year, it's like I hit my 10% bonus I was supposed to get from my old job.  Would make a huge dent in paying my parents back.

[Mr.Macinstache]

Are you upset that your days slide into semi-retirement? I suppose it is only a problem if it doesn't work for you. If you have enough, it might be nice.

No, not upset.. I rather enjoy it. But my logical side knows I should be earning to save and invest more. I'm 40 yrs old, got a late start, so my challenge is really to keep focused on doing work. In my line of business, I put out artwork.. I have to work to create the art, but I only get paid when it sells. So its the whole challenge of being motivate to work in hopes that my work will sell. But it has for some time.

Do you all work at home? I tried that, but found it near impossible to concentrate with the wife and kids there. I ended up renting a small office for only $180 a month. I think it was well worth it as I'm much more productive without the interruptions. This also frees up my old work space and the wife is now using that area for daycare.

[Insanity]

Do you all work at home? I tried that, but found it near impossible to concentrate with the wife and kids there. I ended up renting a small office for only $180 a month. I think it was well worth it as I'm much more productive without the interruptions. This also frees up my old work space and the wife is now using that area for daycare.

I work from home.  Does not really work with a 4 year old and a 8 month old. 

I need to find some office space as even with the 4 year old in day care 3 days a week, the stress of having the kids home two days a week and trying to keep them quiet is proving too much for my wife.

[citrine]

I work from home as well...no little kids so that is awesome :)  DH retires to the fully furnished basement if I have appointments while he is here.  I could spend more time to create a website, work with 2-3 therapists, and do more marketing...but I am not interested in that at all. For me, then it becomes work and I would rather enjoy what I do rather than have to work. 

[Mr.Macinstache]

I work from home as well...no little kids so that is awesome :)  DH retires to the fully furnished basement if I have appointments while he is here.  I could spend more time to create a website, work with 2-3 therapists, and do more marketing...but I am not interested in that at all. For me, then it becomes work and I would rather enjoy what I do rather than have to work.

Is it that we become to comfortable and less aggressive in self employment? Does this delay ER? I think so... that is the ultimate challenge with being SE.

Do you all work at home? I tried that, but found it near impossible to concentrate with the wife and kids there. I ended up renting a small office for only $180 a month. I think it was well worth it as I'm much more productive without the interruptions. This also frees up my old work space and the wife is now using that area for daycare.

I work from home.  Does not really work with a 4 year old and a 8 month old. 

I need to find some office space as even with the 4 year old in day care 3 days a week, the stress of having the kids home two days a week and trying to keep them quiet is proving too much for my wife.

I would recommend it finding a space. The payoff was huge for us. This will alter your tax deductions not having a home office but for us it came out okay.

[Gin]

I have been self employed for 15 years.  I work part time to be home with the kids afterschool and summers off.  Since I work part time a SIMPLE IRA was the best option for my retirement planning.  For those who don't know a SIMPE IRA allows you to put $12k into retirement even if I only made $12k for the year.  I also can have 3% employer match.  It is not based on % of what I make for the year.  The downside the max is $12k for the year.

[Insanity]

I would recommend it finding a space. The payoff was huge for us. This will alter your tax deductions not having a home office but for us it came out okay.

We don't even take the home office tax deduction.   The amount of space we have it isn't worth it if the IRS decides to audit.  It is also a shared space not dedicated to the business.  While yes, I could justify it and get away with it, it just isn't worth the hassle.  I actually don't deduct a lot of things.

[EnergyConsultant]

I have been self-employed for 3 years. Here are some fairly disorganized thoughts:
- I love it, although there have been difficult moments. It's not good for everybody.
- My biggest challenge is not having somebody "on your team", with whom you can bounce ideas off in a somewhat free way and who can help you push to do more marketing. I have a lot of contacts, though, with whom I network frequently.
- I like the feast or famine aspect of the business; to me it's really feast or feast -- hey, when it's "famine", it's a feast of free time (time to work out, catch up with housework, enjoy the semi-retired lifestyle, visit with friends, and travel).
- I am mostly FI (maybe 3/4 of the way), so I am not too worried about bringing in too much money, which helps with stress -- for a lot of people who live paycheck to paycheck, it would be inconceivable to do what I do, and incredibly stressful. I like to do what I do, so I am not in a race to get to 100% FI, I'd rather take the time now for family, etc.
- I do rent an office. It's good for being productive (kids at home), and it creates a professional atmosphere.

[jenstill]

I have been self-employed before (side gigs only; not my full-time thing) and claimed the dedicated work space & expenses in my home against taxes. Next week, I'm starting a new job as an employee of a company (not contractor or anything) but I will work from home full time, using my own equipment and phone line, etc. Am I able to claim any of these expenses and/or the home office square footage (it will be a dedicated, separated space, for only work)? Or is that no longer an option since I'll be an employee, rather than self-employed? I'm sorry if this is too off-topic to remain a part of this thread. Please remove if appropriate.

[Mr.Macinstache]

I have been self-employed before (side gigs only; not my full-time thing) and claimed the dedicated work space & expenses in my home against taxes. Next week, I'm starting a new job as an employee of a company (not contractor or anything) but I will work from home full time, using my own equipment and phone line, etc. Am I able to claim any of these expenses and/or the home office square footage (it will be a dedicated, separated space, for only work)? Or is that no longer an option since I'll be an employee, rather than self-employed? I'm sorry if this is too off-topic to remain a part of this thread. Please remove if appropriate.

That is a good question.. anyone know? I had a dedicated space at home, but being a full time employee, I don't think you are able to do any write offs. Those are expenses that should be reimbursed by your employer, and are negotiated as part of your employment. Don't quote me on that, but that's how I understand it.

My cpa told me that since I have an office, I'm not able to have another dedicated home office.

[Milehimama]

I am self employed, work part time, make part time income.  I could work more and make more but am not willing to part with the time required.

I have little kids and we also homeschool, so kids are always around.  Most of my work I can do with them and much of my work occurs in 5-15 minute bursts (social media management stuff, SEO stuff.)  When I need to have dedicated downtime, I work "split shift" with my husband- he comes home, I leave.  Every Thursday night I spend 6 hours dedicated to my business also - very set schedule.  Sometimes this is from home, sometimes I go to the library or a restaurant with wifi to work.

While I work from home I don't always work AT home.  About 3x per month I visit my partner (also works from home) and we work together for the day.

My work is 90% online (the other 10% meeting IRL with colleagues/clients/networing.)

I also don't take a home office deduction because my "office" is my laptop and my phone and taking a 1/2 of 1% square footage deduction is ridiculous, lol.

In answer to the question, IF you work at home regularly (not just once in a while/when convenient) YES you can deduct: http://www.irs.gov/publications/p587/ar02.html#en_US_2012_publink1000226294  (See the full publication 587 for all of the details)

[FIence!]

I have been self-employed before (side gigs only; not my full-time thing) and claimed the dedicated work space & expenses in my home against taxes. Next week, I'm starting a new job as an employee of a company (not contractor or anything) but I will work from home full time, using my own equipment and phone line, etc. Am I able to claim any of these expenses and/or the home office square footage (it will be a dedicated, separated space, for only work)? Or is that no longer an option since I'll be an employee, rather than self-employed? I'm sorry if this is too off-topic to remain a part of this thread. Please remove if appropriate.

My husband worked from home as an employee of a company, and the way I understand it is that the employer basically would have to mandate that you telecommute--it can't be because you wanted to work from home or asked to. I'm not sure of the specifics of the tax code, but in our case we were moving and husband requested to take his job with him so to speak, so we were told that since it was to his benefit no deduction was allowed. The arrangement has to be "to the employers benefit."

[Mr.Macinstache]

What about vehicles? I claim both my cars for work expense. One is a commuter to my office, the other is a promotional vehicle. They are written off differently.

[Mr.Macinstache]

What about vehicles? I claim both my cars for work expense. One is a commuter to my office, the other is a promotional vehicle. They are written off differently.

I track actual miles driven for business purposes (to client sites typically) and take the IRS standard deduction for mileage, it is pretty generous.

My understanding is that commuting to the office is never depreciable.  It's not like a standard employee gets to deduct their commute, and it's no different for the self-employed.

I'd definitely consult with a CPA for these kinds of questions.  Better safe than sorry.

On my commuter I write off a portion for mileage, repair and maintenance. On my promo vehicle I can write off everything. I'm pretty sure that's how my CPA does it.