When you , you join millions of other business owners hoping to materialize their dreams. However, navigating the murky waters of self-employment can be challenging, especially during the early stages.
While there are no guarantees in business, there are some strategies that could increase your chances of success, especially financially. Here are a few mistakes to avoid as a self-employed person.
1. NOT DELEGATING OR PRIORITIZING
Self-employed people often act as their own stunt doubles in their business during the incipient stages because of budget constraints. However, trying to do it all on your own may be a mistake, says Ronne Brown, owner of Girl CEO and Herlistic in Washington, D.C.
B次元官网网址淲e have to understand that we go fast by ourselves, but we go far as a team,B次元官网网址� she says. For people who feel they canB次元官网网址檛 afford to delegate, Brown says to keep your expenses low until you can afford to do so.
If you do decide to delegate, itB次元官网网址檚 key to spend your dollars in ways that help your business grow. To do this, people should consider focusing on the business operations and systems versus just aesthetics, Brown says. Doing this effectively often requires prioritization.
B次元官网网址淚n the beginning, people are always focused on the look. But thatB次元官网网址檚 not what truly creates the income in business,B次元官网网址� she says.
Brown suggests prioritizing bookkeepers and accountants, building automations or hiring someone to generate leads. Also, keep in mind that you can usually deduct the cost of contracted labor from your business taxes.
2. NOT SAVING FOR RETIREMENT
Saving for retirement as an entrepreneur can easily fall to the bottom of your priority list. This is a common mistake self-employed people make, says Preston Cherry, a certified financial planner in Green Bay, Wisconsin. While it can be smart to reinvest income you generate into your business, it may be equally important to build an emergency fund with three to six monthsB次元官网网址� worth of expenses and invest in your retirement savings.
Cherry says self-employed people have multiple retirement savings accounts to choose from, including an IRA or a solo 401(k).
B次元官网网址淣ot only are you as a business owner saving for your retirement, you are also getting to deduct the contributions (for) tax planning as well,B次元官网网址� Cherry says.
Contributions made to traditional solo 401(k)s and traditional SIMPLE IRAs can provide tax advantages like lowering your taxable income and enabling your investments to grow tax-deferred. That means your tax bill is deferred until you withdraw the money in retirement.
SEP IRAs are designed for self-employed people or small businesses with few or no employees and have similar characteristics.
3. SPENDING MONEY ON COURSES YOU DONB次元官网网址橳 TAKE
As a new entrepreneur, you may want to amp up your knowledge to make your business more profitable. That could mean spending money on courses or training, which can sometimes cost a pretty penny. While investing in yourself can be worthwhile, you may not get a return on your investment if you donB次元官网网址檛 take the courses and apply the knowledge.
B次元官网网址淢ake sure that you are fully committed and that you are dedicated to actually doing the work and sitting down and making time before you invest in any course or class,B次元官网网址� says Brown. B次元官网网址淵ou canB次元官网网址檛 have excuses. People buy stuff with an excuse in mind.B次元官网网址�
Brown also recommends doing your homework before investing in a course, especially on social media. You can do this by looking beyond good content and ensuring the person youB次元官网网址檙e buying courses from has a proven track record of delivering results.
B次元官网网址淔or me, when IB次元官网网址檓 looking for a mentorship or IB次元官网网址檓 looking for people to train me, IB次元官网网址檓 looking at the personal success that they are having in the area that I am looking to grow in,B次元官网网址� she says.
4. NOT CONSIDERING HEALTH CARE COSTS
Health care may be a worry for self-employed people, especially when they donB次元官网网址檛 have employer support. A health savings account is one way to make the financial load lighter since there are many tax benefits.
B次元官网网址淭hereB次元官网网址檚 no tax going in. ThereB次元官网网址檚 no tax while in it, and thereB次元官网网址檚 no tax coming out,B次元官网网址� Cherry says.
With HSAs, contributions are made pretax, interest grows tax-free and qualified withdrawals are tax-free. In 2024, single individuals can contribute up to $4,150, while families can contribute up to $8,300.
You must have a high-deductible health care plan to be eligible to open an HSA as a self-employed person. Another option to make health care more affordable is taking the self-employed health insurance deduction if you qualify.
5. NOT HAVING A CLEAR B次元官网网址榃HYB次元官网网址�
Entrepreneurship can be a way to make extra money or materialize your dreams, but it can also become a money pit. For this reason, itB次元官网网址檚 important to have a clear B次元官网网址渨hy,B次元官网网址� Cherry says. Having a clear purpose can also help you know when to keep pushing through difficulties and when to stop.
B次元官网网址淓ntrepreneurship is not for everyone. ItB次元官网网址檚 not supposed to be. ItB次元官网网址檚 not the only way to wealth.B次元官网网址�
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