How I Break My Own Self-Employment Rules (And Why It Works)

Perhaps you've read my article, Ten Tips For Entrepreneurial Success. I wrote this article before I became self-employed. While I still think that all of my tips are valid, I've learned that not all tips apply to all people. Here are the rules I consciously break and why.

1. Set work hours and stick to them.
I sort of do this, but not exactly. When I started working from home, my plan was to get up at 9:00 a.m., work out, shower, and then work from 10:00-6:00. Well, it turns out that rigid work hours are one of the things I didn't like about working for someone else, and I quickly realized that it didn't make any sense to impose them on myself. Even though I had been getting up at 6:30 every morning and thought sleeping until 9:00 would seem like heaven, no matter how you slice it, I'm just not a morning person. So I don't fight it. I almost never set an alarm. Some of my most productive working hours are late at night, so I stay up late and wake up when I wake up. I've remembered why I used to keep a similar schedule in college. One semester I arranged my schedule so that my earliest class was at 1:00. Fortunately, being a writer does not require me to interact with clients at specific times of day. It just requires me to turn in my work by the deadline.

2. Hire help if you can afford it. Assuming I get to the point where I could afford to hire an employee, I doubt I ever would. I don't trust anyone as much as I trust myself, I like working alone, and I hate taking chances with my money, so even if it might make more financial sense at some point for me to turn activities like tax paying and invoicing over to an employee, I expect I'll keep doing it myself.

3. Make sure you get paid in full and on time. In some businesses, it may be possible to tack on interest charges for clients who pay late, but my current line of employment not only doesn't work that way, it doesn't pay on time. I have learned to compensate for this, however. If a client tends to take 30 days to pay, I just count any work that I do in May for that client as June income. It is very rare that I get paid for an assignment in the same month I complete it. This ends up not being such a terrible thing, though, as it forces me to plan in advance and always be considering where my future income will come from and not focus exclusively on the projects with the most urgent deadlines. It's also nice to know on June 1 that I already have enough money to cover the month's expenses.

I really follow the rest of my rules. I minimize expenses, I am reasonably picky about who I will work for and what types of assignments I will consider, I consciously consider how my interactions with clients will affect their future behavior and expectations, I err on the side of asking too many questions, and I advertise through my website, my email signature, cross-linking, and business cards. As the old saying goes, though, some rules were meant to be broken, and I'm a firm believer in adjusting the rules to meet your own situation and needs.

Photo by absolutwade

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First-Time Homebuyer Guide

The challenge of buying a home for the first time can seem so daunting that it's tempting to just go with the first house that falls in your price range or continue to rent. To help you demystify the process and get the most out of the purchase, check out my First-Time Homebuyer Guide over at Investopedia. The article explains what you'll need to consider before you buy, what you can expect from the buying process itself, and some handy tips to make life easier after you purchase your first home.

Photo by *Susie*

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How Frugal Purchasing Habits Add Up

If you're a regular reader of this blog, you've probably noticed that I advocate seemingly inconsequential savings like getting travel toiletries for free, cutting open tubes of lotion and toothpaste to squeeze out every last drop, and diluting dish soap with water. As you read these tips, you might find yourself asking, "How could these miniscule savings possibly make any noticeable difference in my financial situation?" Well, I'll show you how.

A couple of notes about the chart you're about to see: The music savings is not me advocating piracy. I get most of my audio entertainment in the form of free podcasts and streaming internet radio, leaving me with only a couple of albums I really feel compelled to buy every year. And yes, $10/album is very realistic if you're buying used CDs online or complete albums from iTunes. Or I may just buy lots of individual tracks if the whole albums aren't compelling enough to buy.

The $1.00 per movie price was calculated by dividing the cost of the cheapeast monthly Netflix subscription ($5/mo.) by the number of movies it entitles you to per month (2 DVDs and 3 online viewings). If you only rented movies instead of only seeing them in the theater, not only would you save $60 per year, you'd get to see 60 movies instead of 12.

Item Average Price Saver's Price Times Purchased/Yr. Savings/Yr.
Shampoo $4.00 $1.75 6 $ 13.50
Toothpaste $3.00 $3.00 3 instead of 6 (use less) 9.00
Milk $4/gallon $3/gallon 52 52.00
Gas $130/mo. $120/mo. 12 120.00
Music $10/album $10/album 2 instead of 12 (see note) 100.00
Soda $2.50/6-pack $4/12-pack 48/24 24.00
Movies $10/ticket $1.00/rental @ $5.00/mo. 12 60.00
Coffee $4/weekday $0.50/weekday 252 882.00
GRAND TOTAL 1,260.50

I realize that the coffee savings, which takes up a large chunk of this chart, may not apply to everyone, but I think you still get the point. As you can see, just looking for small savings on a few of the items you purchase regularly can put a ton of money back in your pocket. You can make this number grow as much as you want by seeking out other little areas in which to save money.

In addition to the cold, hard cash you'll hang on to, acquiring the habits of frugality and thrift leads to increased creative thinking about how to obtain the things you need and want and thus exponentially reduce spending in areas you weren't even originally planning to cut back in. For example, once you start diluting your dish soap, you might find yourself diluting your hand soap, realizing that you really only need a tiny squirt of hand soap, or discovering that you can sometimes save money by using dish soap as hand soap. Once you ride your bike to the grocery store, you might find other things on that bike route that you never realized were so easy to get to without a car. Once you borrow a suitcase you need for a trip, it occurs to you that you might be able to borrow a tent for your camping trip. Developing a saver's mindset will decrease your expenses even further than you thought saving $1 on a bottle of shampoo ever could.

Photo by CleanWal-Mart

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Self-Employed Financial Surprises

A few months ago, I made the leap from full-time employee to self-employed business owner. This change involved a considerable cut in pay but a major increase in quality of life. The quality of life improvements are everything I hoped they would be, if not more. The surprise is that many of my expected expenses have gone down, making my financial situation a lot more comfortable than I thought it would be. Let me tell you about some of the differences between my expectations and reality with regard to my new cost of living as a self-employed person.

-I only spend about $30 a month on gas. This is half what I expected to spend even though gas is about $1 per gallon more than it was when I stopped commuting. I used to commute 32 miles a day; now I avoid getting into my car at all costs. With the skyrocketing price of gas, I have actually started riding the bike that had been sitting in my living room unused since last September. The bike was a free hand-me-down from a relative and it was already in ridable condition, so my only expenses were $5 for a small, underseat bag (to hold essentials like cash, ID, and a high-energy snack) and $40 for a high-quality bike lock. For things that aren't easy to bike to, like trips to the grocery store, I go as infrequently as possible (usually every 2-3 weeks). Aside from occasional classes or get-togethers with friends, the grocery store is the only place I drive to. I walk or bike everywhere else (library, bank, post office), and I do all of my non-grocery shopping online. These days, shipping costs are often lower than the cost of driving to the mall.

-I buy almost nothing. I guess some of the things I used to treat myself to were consolation prizes for the misery I felt from being exhausted constantly from an overly-long work week. It seems that the things I enjoy most are money-making, free, or low-cost: reading library books (both for fun and for article ideas), being amused by my cats, working (because I love what I do), cooking, riding my bike, listening to music, and sleeping. My most expensive activity is traveling, which I do every few months. My second most expensive activity is probably cable TV, which I watch plenty of when I need a break from working. Most of the unnecessary things I do buy are pretty inexpensive (clothes from Old Navy, for example).

-Some of my hobbies are becoming self-supporting. I recently sold some photos that I took while on vacation. The proceeds are enough to pay for another trip! Also, the monthly advertising revenue from another site I have been building for years is finally enough to fund another of my passions.

-I was able to lower my monthly health insurance premiums. I thought I already had the best combination of plan and rate, but some significant research and soul-searching revealed that I could change plans, save $100 a month, and not experience a significant decrease in coverage. This was very important as health insurance became a major expense for me when I became self-employed.

-People have given me things because they want to support my new endeavor. I am fortunate to have people in my life who think I can succeed as an entrepreneur and who are willing to show their support by helping out. I'm not talking about major gifts--I'm talking about things like someone picking up finds at garage sales for me to keep or sell on eBay, having extra grocery coupons given to me, and being loaned a parking garage pass so I can avoid the parking fees when I have to visit a crowded and expensive part of town.

Why am I telling you these things? Because maybe you'd like to be self-employed, too, but you're afraid you can't afford it. Believe that the leap to self-employment was no whimsical decision on my part--it was one I planned for and was financially prepared for, even if part of that financial planning included an acknowledgment that I might be living off my savings for a while. But you might find that in addition to the obvious costs you'll give up by working from home, like work clothes and restaurant lunches, you can save money in other, unexpected areas. And maybe those extra savings will be enough to make your dream feasible.

Photo by library_mistress

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