In this episode we talk about the exciting journey from day job to self employed entrepreneur. We cover some things that are good to keep in mind about financial planning, keeping your sanity, the rollercoaster life of entrepreneurs, time management and more!
The Entrepreneurship Myth
There is one myth that we’d like to dispel. This is common whenever you tell anybody that you’re gonna go on a business yourself. People tend to perceive it as very risky or they think that to be an entrepreneur you need to have a huge appetite for risk. Really, entrepreneurs aren’t necessarily risk seekers like many people believe. Different studies have shown that a lot of entrepreneurs are actually more risk averse than most. The difference isn’t in their appetite for risk but in their belief that they can do it; their belief that their ideas are a good one and a lot of them are motivated by believing that they can make an impact by doing this business and that drives them.
Do you know that 90% of employees in the US work for small companies?
I read in an article saying how 99.7% of employees in the United States work for a company with less than 500 employees. That’s a huge percentage of people working for companies that aren’t gigantic. Even further than that is almost 90% of employees in the United States work for companies with less than 20 employees.
If you’re trying to make this jump and you’re feeling you are alone when everyone you know is working at a large company – you’re really not! It’s really a huge segment of the population who is working for smaller companies. If you have an Etsy shop and you have it set up as an LLC or some kind of actual business entity, you’re already one of them. You are already working at a company that is either you or with a small team of people.
Replacing your Salary
You have some income right now assuming that you are working in a day job. And you’re thinking of becoming self-employed. You have a salary and the first thought is “Okay, I have this dollar amount and I need to be able to create this same amount if I want to have a perfectly smooth transition.”
That is not entirely accurate. There are some other things you’re going to want to keep in mind beyond just that salary figure. Most employers are required to provide benefits to their employees which could include things like 401K, medical insurance, etc. so those are things that you also want to keep in mind.
1. Think Medical Insurance
Medical expenses can be pretty high. We’re talking about the premium you’d be paying to have a medical plan available to you. It’s actually a big amount so before you go ahead and make that jump, this is something that you’re gonna want to consider.
One of the ways that you can do this is to jump on to eHealthInsurance.com. You can put in your information and they’ll throw you a list of plans that are available in your area along with the monthly premium for each of those. You can get a ballpark figure for what you could expect to pay or have to pay in the medical arena.
You also might want to talk to a broker who’s going to help you consult and figure out which plan might actually be the best for you and for your family because they’re the ones who understand this industry a whole lot better.
2. Think Taxes
When you get paid by your employer, the paycheck that they’re giving you already has your tax removed from that so your take home dollars are the money you can actually spend. When you’re self employed, nobody is doing that for you. Nobody is taking that tax money out for you so it’s up to you to understand that a certain percentage of that needs to be set aside so that when tax season comes around – you have money to pay to the government.
Figuring out taxes is a tough one because your taxes are going to be different whether or not you are an employee for someone else or are self employed. But there’s a couple of different options for you:
- If you’re not doing your own taxes, talk to the person who is doing your taxes because they’ll have a good handle of your current financial situation and understand what changes are going to be because chances are they dealt with these many times before.
- If you are doing your own, you can definitely keep doing what you’re doing. Take a look at TurboTax (probably the most popular option) and you’re probably already using the right TurboTax package already if you already have a business set up and you’re considering jumping over to full time. But you still might want to take a look what other things are going to change.
One of the things that we also want to talk about is deductions. As someone who is self employed, there are a lot of things that you are allowed to deduct for your company. If you’re buying a laptop for your company you can deduct that as a business purchase. If you’re buying software, hosting, domain name, or if you are a Marmalead Entrepreneur – those are all tax deductibles because it’s for your business.
There’s a little bit of a stigma about that where people think that you’re taking advantage off of deductions and that could cause issues for you. But that is not really the case. These things are in place to help people get started and succeed in small businesses because that’s good for everybody and the economy. They are in there for a reason to help out so make sure you use them.
4. Think Savings
Another thing is how much money you want to have saved up. This is an addition to making sure that you can replace your current income for the standard of living that you want to maintain. You probably want to have a bit of a runway and have some money saved off for when business is slow or when something unfortunate happens.
Experts recommend around 6 months worth of savings. Some say it’s anything from 3 to 12 months. But it depends on where you are at, how comfortable you are, and what other options you have if things don’t work out.
Important tips on your Entrepreneurial Journey
When to go full time on your business?
You don’t always get to choose the best time to go full time on your business. Your business might need you more now. You are going to end up needing to go full time before you are really ready. Your business can start to become more demanding now. Your business might need you full time and you probably don’t want to let your business suffer because you can’t devote more time into it. Are you willing to risk your business simply because you’re not willing to do it full time yet?
Keeping your Sanity
It is really important regardless of who you are. Regardless of person, everyone goes through different stages of how they feel about things.
We are a very habit and routine-based creatures. Humans do well when things are standardized – like how jobs are 9AM to 5PM. When you leave that more structured environment and start working on your own – especially if you work at home – you got to maintain that level of sanity. Maintaining your sanity might be needing to make an effort to go work from a coffee shop every once in a while. If your business involves making physical things, you probably can’t bring your workshop with you. But you might be able to bring a laptop with you and use that time to follow up on messages and do some digital type things that you can catch up on.
You might also want to think about your fitness schedule. Maybe you were a part of a gym on your day job and you hit the gym a couple of days per week. Even the amount of activity that you have at an office job where you’re getting up to go to meetings and talk to people in their desks, walking from your car etc. This is something you might not notice a whole lot at first but keep it in the back of your mind and try to keep tabs on how you are feeling both sanity-wise and physically.
Self affirmations are basically the things you say to yourself to reinforce something you believe or want to believe. If you say “I am going to have a great day!”, you are going to have a better chance of actually having a great day because it’s really not what happens to you, but how you react to the things that happen to you. Regardless of how far you want to take the actual effects of self affirmation – at the very least – saying something positive is going to make you feel more positive.
It puts you in a positive frame of mind and lots of little positive things are going to start happening. When you look for the positive, more positive things seem to happen. If you look for negative things, more negative things seem to happen.
As you’re working as an employee for somebody else, time management is often pressed upon you. You’re expected to work at a certain time, your lunch hour is between X and X time, and you’re expected to stay at work until a certain time. Now when you’re working from home, it depends on how you have your day set up. Overall, your day is going to be a whole lot more wide open and there’s going to be fewer people telling you what you need to do. Like what we mentioned before, people are more routine oriented and most people thrive in an environment where something is in routine. It’s going to be up to you to come up of your own time management, methods, tools, and how you want to break that down. Keep yourself honest about it and find what works best for you.
Since you control your day, you can try all sort of experiments and see what works. But it also means that you need to have more self control and not do things like spending your whole day on Facebook or watching Netflix.
Turn notifications off!
Turn notifications off your phone. Don’t let it send notifications of everything because you’re going to constantly look at your phone to see what’s going on. Use it as a tool but don’t let it own you.
There’s a Do Not Disturb mode on every phone and if you turn that on, notifications won’t show up unless the call is from someone important or if an emergency comes up.
Also, keep your goals in mind and think down the road what your end goals are. If working on Twitter and sending a bunch of tweets out doesn’t help you get towards that goal; is that the best use of your time? Could you be doing something different? Could you be re-doing your photos? Could you be re-doing your descriptions? Should you be coming up with new products? What should you be spending your time on that gets you where you need to be?
The Entrepreneurship Mindset
The whole idea of entrepreneurship – being an entrepreneur, mompreneur, dadpreneur etc. is really a mindset of all these things that we’ve talked about. Leaving a full time job is a pretty clear goal right there. Entrepreneur mindset is keeping focused on that; staying motivated and hustling so hard towards that goal.
Your competition doesn’t want you to do that. Your competition wants you to watch Netflix for 5 months straight. Your competition wants you to give up. They want you to get discouraged. They want you not to manage your time well. So that’s why you have to keep up the hustle because there’s always going to be competition out there. No matter what you’re doing there’s gonna be other people competing with you.
The only place where there is no competition is failure.