Site icon Barb Sotiropoulos

Smart Strategies for Being Self-Employed

Many people have dreams of leaving their 9-5 job to pursue their passion, but not everyone is able to to do it successfully. There are some highly effective strategies for being self-employed that anyone considering it should know. These strategies will increase the likelihood of success in your first year and beyond.

Disclaimer: I’m not a financial advisor. The advice discussed in the article is from my experience only. Please consult your own financial advisor for your unique needs.

Diversify Your Income Streams

It’s very important to diversify your income no matter what you do for work. Many people found during the pandemic when their particular job had to close its doors that there was no ‘online version’ of it available to compensate. While government subsidies were handed out, in some cases it was barely enough for people to get by.

There are many ways to make a little side income even while you work full-time so that you’re not relying on your primary job for your income alone. A great example that doesn’t take a huge amount of effort is reselling items you don’t need any more on Facebook Marketplace or even eBay. Not only will this help declutter your home but it will help you make a side income and keep more items out of landfills. 

By establishing some proven ways to have other sources of income before you leave your full-time job, it will make the transition less financially scary. Get creative with ways you can start making a side income. Before I transitioned away from my full-time job as a graphic designer, I already had a few different income streams in place. One of these fortunately enough was being able to freelance my skills as a graphic designer. Consider if the skills you have at your current position could be contracted out for hire.

If it doesn’t violate any contract agreements you have with your current employer, start taking small side freelance jobs to get a feel for it and establish a client base. That way when you do decide to transition you aren’t going into it without proof that you are able to offer your skills for hire. This alone was huge thing for me to be able to leave my full-time job and still pay my bills.

Because my freelance rate was also more than I made as full-time employee for less hours, this also allowed me to still work on my art business comfortably. It’s important to note the increased rate also makes up for the things that are no longer rolled into being employed by someone else like health benefits, a pension plan, paid vacation and a guaranteed paycheque every two weeks. These are are all now things that fall on my shoulders to take care of financially.

Start Thinking Differently About Money

One of the key strategies for being self-employed has a lot to do with how you handle your money. Before I quit my job, I made sure that I knew exactly what expenses I had every month, and which ones I could sacrifice. In this budget, I also factored in a little wiggle room for extra expenses. Even so I don’t have kids, I do have a dog and he comes with his own set of expenses that are often unexpected. 

Think and Plan in Segments

My primary goal every month is to make sure I make enough money to cover my non-negotiable bills and expenses. After that I balance any income I make between my savings and paying off any debts. If at all possible I would highly recommend paying any debts off or as much as possible before you leave your full time job. Having the weight of debt payments as part of your budget is not fun or wise.

Home mortgages are an exception here, but credit card debt for example, can spiral out of control quickly. If you’re struggling with payments take a moment to consider if you need to take an honest look at your spending habits and make some hard changes. Perhaps you start making your own coffee instead of buying it every day. We all have our little luxuries we enjoy in life but it all adds up. 

You’re going to need to be willing to sacrifice some aspect of your current lifestyle, at least for a while, when you’re first starting out. For me, it cutting back on how much I ordered in. While we did make an effort to do it once a week to support our local favourite restaurants during the pandemic, I was notorious for just buying my lunch and dinner before when I had a workplace to go to. It’s amazing how quickly that expense adds up.

In Canada, when your self-employed income reaches or exceeds $30,000 you are required to get a GST number and start charging and paying GST. Treat saving for GST and income tax like another bill. While a great accountant will help you find deductions for your business to be able to lessen those payments, you also don’t want to be stuck come tax time with a giant bill you can’t afford to pay to the government. When you reach a certain threshold they will likely start requiring you to pay in instalments so that you don’t have to pay a giant lump sum all at once.

Have an Emergency Fund

I would strongly recommend saving between 3 to 6 months of living expenses before you quit your job. This emergency fund will help you though lean times and help avoid you needing to use your credit card. You can build up this fund with any side projects and extra money you make while you’re still employed full-time. Understanding what your monthly budget needs are is incredibly key.

This may seem like a lot of extra work, but I’m going to be really honest, if you aren’t willing to hustle and work hard now you are going to have a rude awakening when you leave your full-time job. Being self-employed is often leaving your 9-5 to work 24/7 especially in the beginning. If you’re really passionate about what you are doing it doesn’t really feel like work most days. You can’t get more hours in the day though, and eventually that catches up with you.

Consider things like, gift giving occasions and medical expenses that might not be covered by insurance and add a little bit extra to your budget every month than what you think you might need. The basic structure of your budget is the minimum you need to save. You may also have to hold off on being an extravagant gift giver for a while if that was your style beforehand.

Don’t Spend Money You Don’t Have Yet

This is absolutely huge. Being over confident that would have the money that I needed to pay for a couple large purchases, I put them on my credit card. I had some steady freelance work coming in this past year and then all of a sudden it dried up and another freelance client I had lined up decided to postpone. Chalk this up to a lesson learned because I should have had the money in my bank account before I made those purchases. Of course, on occasion you will have situations and emergencies you can’t wait to save the money for. If it’s not a mandatory purchase, however, it’s always better to wait until you have enough extra money put away to cover it.

To add to that, it can be exciting when you get a large flow of cash all of a sudden, but try your best not to spend it all at once. I can’t stress enough how important it is to only spend what you need at the moment and to squirrel the rest away. You have to get used to planning your money completely differently. As someone who always had an employer for the majority of my working life this took some getting used to, but it’s honestly made me a lot more financially responsible. 

Invest in Helpful Tools, Technology and Apps

At one point in time running your own business would have been an uphill battle on so many fronts. You’re already wearing a lot of different hats and some of them may be in areas you are really not super strong in. My favourite recent strategies for being self-employed is an app that I invested in to help organize and run my freelance graphic design and commission business.

I use a cloud-based CRM program called Honeybook that is basically an all-in-one service. It allows you to book clients, create contracts, send proposals and invoices, and so much more. They have awesome templates that give you a great starting point that you can customize for you business. There is even a migration tool that you can use to bring existing client info, and contracts into the program and have the Honeybook Team format them for you. You can learn even more about how I use this program HERE and get a discount on your first year with my referral link.

Organization is super important when you are self-employed. That means keeping all of your receipts and remembering to log all of your expenses each month. Do yourself and your accountant a favour and stay as organized as possible. I was lucky to have a friend recommend their accountant who specialized in artists and small businesses. When I contacted her, I made sure that I asked what things would make it helpful for her to do my taxes each year.

Thankfully, she had a spread sheet she could share with me that I could enter all of my information into for her. You could also sign up for an accounting program like Quickbooks that will help you keep all of that information organized when it comes to tax time.

Think about what your individual business needs and look into if there is a free or low cost program that can help you automate certain tasks. When you are self-employed you will realize that you often have less free time than you used to, so you want to minimize how much of that is administrative time. There has never been a better time for having access to online and digital tools to help you run your business so don’t be afraid to spend some time finding the ones that are best for you.

Check out my favourite recommended tools that I use in my business.

Personal Strategies for Being Self-Employed

One thing you will have to get used to when you first out as self-employed is that there will be a rollercoaster of emotions you will likely go through. Month to month will typically be different especially from an income perspective. This can lead you and perhaps those around you to sometimes doubt whether this was the right choice or not. It’s completely normal to expect lean times and more fruitful times especially when you are starting out.

Mental health is not something that should be ignored at this time. Prioritize getting enough sleep, exercise and DOWN TIME from your business. The surefire way to burn yourself out in the first year is to not treat your personal time with the same importance as your business. Yes, you will need to hustle more, but that shouldn’t actually mean working 24/7 although it may feel that way at times.

Your mental health and relationships will suffer if they aren’t also given care. Having a solid foundation for support within yourself and your immediate circle of people is crucial. Regularly connecting with a therapist or business coach can help keep you on track and give a sounding board for the days when things feel tougher or you need guidance to get through a particular challenge you are having.

Final Thoughts

Although I am only one year into my full-time freelance journey at the time of this post, I have learned a lot about what it takes to do this successfully. Each day is different and some days I feel like I am winning more than others. Choosing to be in charge of your own destiny when it come to your income can be a scary prospect, especially if you have dependents. Make sure before you take the leap that you discuss the decision with your partner or anyone else that is also a decision maker in your household.

Even if you aren’t ready to make the leap to being self-employed full-time just yet, work on getting some additional streams of income in place in the meantime. While you may feel secure in your job now, that could change at any moment due to a circumstance that is not in your control. Whether you use that extra income to build your savings, pay off your debt or fund your passionate hobbies, it will help get you closer to your end goal than if you choose to do nothing at all.

Are you self-employed? What was the biggest hurdle you had to overcome?

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