Many couples love the idea of being self-employed. After all, you get more control over your schedule and what you do, and could even get to spend more time together.
But being self-employed isn’t always easy. In fact, it can be really hard, especially if you don’t prepare properly.
Whether you are looking to make the leap into self-employment or are already on yourway, here is some information you need to know.
Self-Employment Impacts Your Taxes
When you’re self-employed, your federal taxes become a whole different monster. First, you have to determine your company type, such as a sole proprietorship or corporation. This will help determine if you are on the hook for self-employment taxes, such as Medicare and Social Security, or if your company is operating as its own tax entity.
You’ll also have to review your schedule for paying your taxes, as these can vary based on your entity type. This involves estimating your profits and making sure you submit the necessary amount to the IRS on time.
Additionally, you’ll have new tax deductions you’ll need to track, like asset depreciation and business expenses.
While this sounds complex, it doesn’t have to be. There are resources that can help you organize your finances and prepare your taxes, ensuring you stay on track.
Managing Risk When Self-Employed
Self-employment can be risky. Unlike traditional employment, your success is more in your hands. But, that also means that, if things go wrong, you could end up in financial trouble.
Irregular income is common among those who choose self-employment, so you need to plan accordingly. Before your venture into self-employment, make sure you have a strong emergency fund. That way, should you have a dry spell, you still have enough money to keep your household afloat.
Handling What Your Employer Used to Manage
When you become self-employed, a range of items that were once in your employer’s hands now falls into yours. For example, you’ll need to find your own medical coverage, retirement plan, life insurance, and possibly much more.
Most employees just use their company’s options, so you’ll need to find alternatives if you venture into self-employment. Otherwise, you may find yourself without something important simply because you didn’t think to replace it.
Create a Decision-Making Plan
One of the challenges of being self-employed as a couple is making decisions. Since there are two of you, you could end up on opposite sides of an issue. This can lead to disagreements, even full-blown fights, about how to proceed.
Instead of leaving things to chance, create a plan that will help with decision-making. For example, you can use a formal business plan as a base or choose specific milestones to trigger certain changes.
Ultimately, you’ll have to work together to be successful, so you need to be ready for conflict, should it arise. Otherwise, the stress of self-employment may pull you apart.
Overall, self-employment can be great for couples, as long as you plan to deal with hurdles that may arise. Take some time to get things in order, and it’ll be easier to enjoy the experience.
Looking for more great articles from Newlyweds on a Budget? Here are a few to get you started:
- How Much Money Do You Need for an Emergency Fund?
- Till Debt Do Us Part: Signs of Financial Trouble in a Relationship
- Financial Planning and Insurance Tips for Newly Married Couples