Career Advice

Are You Self-employed? These Are the Life Skills You Need

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Partly because of the pandemic, more Americans are leaving their jobs to become self-employed. In 2020, for example, almost 59 million were freelancers.

Self-employment provides several benefits. First of all, the earning potential is generally much higher than in a traditional job. A survey showed that some freelancers make 100% more on their own than they did while working at a full-time position.

Also, there’s no need to work 9-5 anymore. If you want to take an hour-long lunch break or go on holiday for two weeks, nobody will get upset with you. You can also choose your clients and the type of work you want to do.

However, there’s no such thing as an easy job. To succeed as a self-employed person, make sure you have these skills:

Self-employment provides several benefits. First of all, the earning potential is generally much higher than in a traditional job. A survey showed that some freelancers make 100% more on their own than they did while working at a full-time position. Click To Tweet

1. Ability to Prepare Your Tax Returns

Filing taxes can be a complicated process for anyone, but it is even more complicated if you are self-employed. If you are self-employed, you have to file your own tax returns every year. Not only do you have to file them yourself, but you also need to know how to calculate what you owe or how much of a refund you’ll receive.

Of course, taxes can be more expensive for you. Your income may fluctuate every week (or month), you don’t have the regular benefits employees enjoy, and you pay for insurance.

The good news is you can claim many deductions. These include:

  • Home office expenses
  • Vehicle expenses
  • Utility expenses related to your business or employment
  • Purchase of health insurance premiums
  • IRA contributions based on your income level

The more deductions you can claim, the less money you’ll have to pay in taxes. Even better, you can use tax software for preparers to make filing easier and faster. All possible deductions are already part of the list.

2. The Skill to Get and Negotiate a Loan

If you are self-employed, you have to borrow money for some unexpected circumstances or personal reasons. For example, if one of your children needs surgery, you have to pay medical bills.

One of the life skills you have to learn is how to obtain and negotiate a loan. You need to know which banks offer loans with the most favorable conditions. Keep in mind that not all lenders are willing to finance a business. Even if they do, they would have to consider your income and employment status.

Some good tips on how to negotiate a loan include:

  • Start with smaller loans to see how the process works.
  • Provide collateral such as your house or car if you can secure it.
  • Offer a co-signer, such as your spouse or business partner. That way, lenders get the guarantee that their money will be paid back regardless of what happens with your business.

3. Capacity to Get and Pay Your Own Health Insurance

A 2019 survey shared that over 50 percent of self-employed individuals don’t think they need health insurance. But you do because you can’t rely on another person to cover medical fees if you get sick.

You should also never be without health insurance because it will expose you to losses and unexpected expenses. Medical care is one of the biggest costs Americans make in their lifetime.

But health insurance can be incredibly expensive. How do you make it more affordable?

  • Know your options: There are several types of insurance plans. You can get group or individual coverage. You can buy private or government-sponsored coverage.
  • Shop around: There are several providers for group and private health insurance plans. You can easily compare them to find the best price.
  • Choose a plan closest to your needs: If you are a healthy young person with no known family history of serious disease, you can buy a basic health insurance policy.
  • Compare your options regularly to see if you can get a better deal: For example, you might have to switch between three different providers every three years to take advantage of their renewal discounts.

4. Ways to Create Multiple Streams of Income

Having multiple streams of income is a very good strategy to ensure your business and yourself can last and thrive in the future. As the saying goes, you shouldn’t put all your eggs in one basket.

If your primary business isn’t doing well or not bringing the money you need, you can rely on your other sources to help you get by. In this manner, you can avoid taking up a loan and adding more to your debt.

Your other sources of income can also provide you with passive revenues. In other words, even if you don’t give them hours of your time each day, they will continue to generate sales.

Self-employment offers a lot of benefits. But having a good understanding of how to manage your finances and prepare yourself for risks is also an important skill.

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