Reflections of Self-Employment in the First Six Months

In the personal finance space, it feels like quitting your job is a glorious endeavor. People sell courses and products to help you quit your 9 to 5 (by the way, who works a 9 to 5 nowadays?) and have the freedom of creating your own schedule.

As someone who quit their job last year to start a company, I want to share what it’s been like – reflections of self-employment without the hype. I want to share how I’ve adjusted my spending, the struggles of entrepreneurship, and even make a case for keeping your day job because I don’t believe entrepreneurship is the right path for everybody. Plus, I’ll share the benefits of being your own boss because there are many upsides.

You can consider this a reflection more than anything. I hope that by writing about my own reflections, you’ll take something away from it to help you in your own life.

If you are considering starting a company or quitting your day job, this article is for you.

Figure Out Why You Want to Quit Your Job

Before deciding to quit your job, are there other options?

It’s a strong job market. Employees have not been in a better position to negotiate raises, remote work, or other wishes in a very long time. Plus, if you can’t get your company to agree to certain conditions, there are probably other employers willing to agree to your terms.

Quitting for the sake of quitting, without another plan, is a risky endeavor. It can work out, but personally, I feel it’s best to have a plan.

What are you not currently getting from your job?

Think about the following questions:

  • Do you enjoy the culture?
  • Are you satisfied with your pay?
  • What other benefits are provided (medical, dental, 401(k) match, transportation, stipend for healthy living, etc.)?
  • How do you like your coworkers?
  • Can you unplug after work or are you tied to your email at all hours of the day and night?
  • What opportunities are there for advancement?
  • Is the company transparent in their vision?
  • How is the company growing (quick and unsustainable, not at all, quick and sustainable, slowly, etc.)?

Reflect on your current work situation to better prepare yourself for what comes next.

Determine Your Living Expenses – Budget with Purpose

Once you determine what you want, figure out your living expenses.

I can’t stress this one enough.

I don’t believe in budgeting your entire life, but there are key points in life to do budgeting. A transition is one of them. The others include before starting your first job, during major pay raises, and any other major life transitions.

If you don’t know where your money is going, you have no idea how much of your expenses are fixed and how much are variable and can be adjusted.

This is critical because if you plan to quit your job, but you have high fixed expenses that can’t be adjusted when you take a pay cut overnight, you may be out of money sooner than expected.

Before I quit my job, I looked at my spending at least three different times. I even had family members look at it to see if there were areas I was missing. When you’ve been accustomed to living a certain way, you forget about major expenses your employer is covering or have been on autopilot.

I also had the opportunity to review recurring expenses and be judgmental in what I actually wanted to continue with and what could be stopped.

For example, streaming services got cut quickly, even before quitting my job. Although the expense seems insignificant, small recurring expenses can add up. I cut Netflix because I already had Amazon Prime and their streaming services. Once in a while, I add back Netflix for a month when Prime Video gets stale and to keep my existing Netflix account history.

I actually added a couple newspaper subscriptions, which was a new expense for me. I had other ways to access them in the past, but that was going away, and I wanted to stay up to date.

The biggest expense that was changing was housing and medical insurance.

Since we were moving, I was going to rent my townhome. I modeled a range of possibilities, depending on how market prices were adjusting during the pandemic. We also were moving to a lower cost of living area, which meant my housing expense would be about 50% less if the rental income would cover the mortgage.

Though in reality, I was actually taking a risk and increasing my housing expense. If I had a tenant who didn’t pay, I was still responsible for a mortgage payment plus rent. If that happened, how long my savings would cover my expenses would be far shorter.

As it turned out, the rental income almost covers my mortgage and apartment rental, but there is still the risk that changes either through rental prices dropping, tenants doing damage, rent going up, or a variety of other factors.

I also had to pay for medical insurance for the first time. That was a huge new expense. Although I am thankful for COBRA and the option to go on an insurance marketplace plan, it’s expensive and time consuming. Having health insurance through an employer is often cheaper and less time.

I’ve had to deal with mailing checks, signing paperwork and sending it back electronically, adjusting my autopay check because the plan price changed in the new year, and more. I wish they had an electronic process to sign up for COBRA and pay. It’s been a hassle compared to many other financial decisions.

Although personal expenses are important, I also had to project business expenses. Although I work virtually as a financial planner, there were start up expenses and ongoing expenses. A few popped up I hadn’t considered, which was a real bummer, but that’s the joy of starting a company. Unexpected things happen, and you must adjust.

Before you make any decision, look at your budget. What has your spending been like the past few years? How could it change if needed?

I’ve historically kept my fixed expenses low relative to my income to give myself flexibility. I was very grateful for that decision.

Have a Backup Plan

What’s your back up plan if things don’t work out?

It’s difficult to say because nobody knows what the world will look like when you need the back up plan.

Will your skills be in demand? Will there be a worldwide economic recession? Will a major employer layoff people in your city? Will a health event impact your family?

A back up plan is important to have, but equally as important is recognizing that the back up plan may not work when you need it.

In my case, it appears demand for financial advice is a growing industry with demand and less people entering the profession. At least right now, I think it’s tough to find financial planners to fill the roles open today.

I don’t know if that will be the case in the future, and I hope never to need the backup plan because I can’t fathom going to work for someone else again, but the plan is there if it is needed.

The backup plan also may be different, depending on your savings. In my case, I gave myself a long runway (years) for my firm to work out. I painted some very, very pessimistic assumptions. Based on what is happening in the business, I am hoping it is profitable by the end of the year, if not sooner.

The back up plan for some might be a part-time job or a side hustle to help bridge the gap while building the business.

In my case, I am focusing solely on the business.

Disadvantages of Being Your Own Boss

You have decided you are ready to take the leap and become your own boss.

Wait a second.

What are the disadvantages of being your own boss?

I know it’s an odd question to ask because many people claim to love being their own boss, but there is self-selection involved. The ones who didn’t love being their own boss are no longer their own boss! They went back to work for someone else.

No Colleagues

Based on a few months of being my own boss, one disadvantage of is not having colleagues. In my case, I have no employees and don’t plan to have any soon. Even if I did have employees, I could see it being tough because an employee-employee relationship is different than an employee-boss relationship.

Thankfully, there is a great advisor community to connect with, but it’s not as enjoyable as having a close relationship with colleagues around the water cooler.

Making All The Decisions

Another disadvantage is I must make all the decisions. I never realized all the decisions that needed to be made. I like to tell the story of starting out and realizing I didn’t have a file structure. Then, I had to choose how to set up the file structure after researching ways other people set up the file structure.

It’s not something I thought about as an employee because the structure was already in place. I had feedback for how to improve the existing structure to make it more useful for employees, but I didn’t have to create it from nothing.

It’s a different experience creating something from nothing. Until you do it, it’s difficult to describe.

It’s exciting and odd. It’s power and surprise. It’s uncertainty and belief.

Not Earning an Income

At first, you don’t earn anything, unless you bought an already cash flowing business.

In my case, I’m paying for the privilege of earning no money. In fact, my expenses are higher than my income right now. I’m losing money each month, which is normal with a new business.

But, it’s a new experience and feels strange.

Long-term, hopefully, that won’t be the case. As I said before, I hope by the end of the year, if not sooner, to be profitable. I chose to make a few key investments in my business with aspirations for growth, which meant making the business profitable would take longer.

There is a very real opportunity cost in starting a business. More taxes because you pay both sides of the Social Security and Medicare tax, as well as no more 401(k) company matches or other perks.

Since I am the business owner, I pay the taxes, I am the only one contributing to a retirement plan, and if I want something, I have to pay for it.

There are other disadvantages, but these are the three big ones that have stood out to me.

Advantages of Being Your Own Boss

With the disadvantages out of the way, what are the advantages of being your own boss?

Making All The Decisions

Although making all the decisions is a disadvantage, it’s also an advantage.

Want to end for the day because you are no longer productive? Stop working. Go for a walk. Run an errand.

There is no company time and your time. It’s all one time. You can use it interchangeably.

I’ve woken up late when I haven’t slept well. I’ve worked longer days when I need to get something done. I’ve found instead of focusing on the time spent working, I focus on the output, which has shifted how I work.

I tend to work more in bursts. I am most productive in the morning, which has meant shifting the most important work or creative work to the morning, often taking a longer walk in the mid-afternoon, and working in the evening at times.

I always struggled with being productive around 2-3 p.m. in the afternoon if I am not in a client meeting, so I’ve shifted my day by blocking time for tasks that I don’t mind doing during that time.

Controlling my time has been a huge benefit of self-employment. I feel better about my work and don’t mind working at “odd” hours as much.

Keeping The Profits

Although I don’t have profits yet, I am listing this as an advantage. The financial upside is much greater when you own the company.

You decide when to hire. You decide if you want to keep your expenses low or reinvest for growth.

Plus, you get the equity you create. When you want to sell the business, you may earn a financial windfall.

But, don’t forget that because you keep the profits, it comes with more headaches!

Doing Things Your Own Way

This is probably one of the most often touted advantages of self-employment, and for good reason. I don’t have to wear a suit and tie to client meetings like I did in my prior role.

I can blog about what I want to talk about. I can create videos that are not “professional” according to industry standards. I can be myself and not conform to a certain way of doing things.

You’ve seen more people become their own professional brand, and I think you are going to see more of that in the future. Most people don’t want to do business with a corporation. They want to do with a human being.

Being yourself can be a huge advantage.

Summary – Final Thoughts

Quitting your job is a big step. It’s important to weigh what you are giving up and what you are working towards.

Quitting for the sake of quitting might work out, but it might also make you horribly miserable.

First, figure out why you feel the urge to quit. Are there ways to improve your situation either internally or externally?

From there, figure out your finances – personally and professionally. If you are starting a company, leave a buffer for unexpected expenses. Then, leave a buffer on the personal side, too. Life happens!

Although you never know how your backup plan will work, it’s a good thought exercise. Have one and adjust as needed.

From there, think carefully about the advantages and disadvantages of self-employment. Not everybody is cut out to be self-employed. Not everybody is cut out to be an employee either. You know your personality best.

Which do you think suits you?

Disclaimer: This article is for general information and educational purposes only and should not be considered investment, financial, legal, or tax advice. It is not a recommendation for purchase or sale of any security or investment advisory services. Please consult your own legal, financial, and other professionals to determine what may be appropriate for you. Opinions expressed are as of the date of publication, and such opinions are subject to change. Click for Full Disclaimer