Want to Take the Leap Into Self-Employment in 2023? Do These 3 Things First

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KEY POINTS

  • There are many benefits you can enjoy by virtue of being self-employed.
  • You might also face some financial challenges, so it's important to prepare for those before jumping in.
  • Ensure you have money to cover six months' worth of expenses, and make a plan to handle your health insurance coverage. 

You don't want to dive in without being prepared.

The number of people who are self-employed has grown through the years. And if you're interested in venturing out on your own and giving up a salaried job, you're no doubt in good company. 

There are numerous benefits associated with being self-employed. For one thing, you can often do your job from any location, which means that if you want to relocate to a less expensive part of the country, that option may be on the table. You may even be able to move abroad if that's a goal of yours.

Being self-employed also means getting to be your own boss. You can work the hours that are convenient for you, and you don't have to commit to a preset schedule day in, day out.

But becoming self-employed can also present some financial challenges. For one thing, when you take the leap into self-employment, you give up the steady, predictable income you may have once enjoyed. And also, you lose out on workplace benefits -- things like paid time off for vacation as well as when you're ill. 

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Still, you may be eager to go the self-employed route in 2023. And that's a decision that could really end up working out well for you. But before you dive in, make sure to tackle these important moves.

1. Build up a lot of savings

When you're self-employed, your income might be erratic. You could have a month where you earn $5,000 and another month where no money comes in at all. And even if your workload is steady, you never know when a given client might be slow to pay.

That's why it's essential you have a nice amount of money in your savings account before becoming self-employed. In fact, it's a good idea to sock away enough money to cover a good six months' worth of bills. That will give you some breathing room during periods when you can't find a lot of work or clients are slow to pay.

2. Have a solid plan

Maybe your goal is to become a self-employed IT consultant. Or maybe you're looking to become a freelance marketing professional. Either way, it's important to have a game plan. 

Exactly what services will you be offering? How will you find new clients? How much will you charge? And how much will you have to spend on equipment that makes it possible to do your job? These are all questions you should answer before giving up your current job and moving over to self-employment.

3. Figure out what you'll do for health insurance

Going without health insurance is a dangerous thing. You could end up with thousands of dollars in medical bills from a single health issue if you don't have insurance.

If becoming self-employed means giving up your health coverage, you'll need to make sure you have a plan for getting new coverage. If you're married and can hop onto a spouse's plan, great. If not, you'll need to look at the cost of buying a marketplace plan and make sure it works for you financially. If not, you may want to hold off on becoming self-employed, boost your savings, and then make that move so you can swing health coverage from the start.

There's much to be gained by going the self-employed route. Just make sure to address these essential items before you make that major change.

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