Self-Employed: Financial Considerations
Starting a business means taking all financial aspects into account. Here’s where to start.
With the explosion of startups across the business landscape, you may be wondering if it’s feasible to start your own company. In addition to the perk of being your own boss, there are also financial considerations to take into account. Learn more about the fiscal intricacies of starting your own business.
If you start a business, look into what types of insurance coverage you’ll need to help keep you protected. Most business owners invest in property insurance, liability insurance, commercial auto insurance and workers compensation insurance, but your needs will vary based on the nature of your company and your work.1 Consult with a qualified state licensed attorney or other expert as you’re reviewing your options to help make sure you get the coverage you need, while avoiding the added financial stress of policies you don’t need.
Whether you’re seeking new coverage or adjusting an existing policy, it’s important to have a plan in place for the unexpected.
You may lose your employer-provided life insurance coverage if you leave your current position and venture out on your own. If there are additional people financially dependent on you, such as a business partner or your family, maintaining life insurance coverage is vital. Whether you’re seeking new coverage or adjusting an existing policy, it’s important to have a plan in place for the unexpected.
When you’re self-employed, it’s important to establish and adhere to a budget from the beginning, or you risk the pitfall that causes many people to fail: running out of money.2 You can either track your finances on your own or turn to a digital cash flow management tool, such as QuickBooks or Float, to help you stay organized.
Many self-employed individuals choose to rent a workspace instead of working from home or a coffee shop. In fact, from 2016 through the first half of 2018, the number of coworking spaces grew by nearly 50 percent in 19 large cities.3 The workspace culture can be beneficial, especially when you’re just starting out, because you’ll spend the day surrounded by likeminded people and some great business resources. However, the average cost to join a coworking space is about $274 per month, so be sure to take this expense into consideration and shop around your area to make a smart financial decision.4
Depending on the nature of your business, it may be financially challenging to invest in all the equipment you need. Luckily, instead of buying it all at once, there are two options you can consider:
A type of business loan that allows you to make payments over time instead of all up front.5 Once you make your final payment, you fully own the equipment.
A lender buys and owns the equipment and leases it to you for a monthly fee. At the end of the lease, you can choose to purchase the equipment, extend the lease, or return it and find something new.
From life insurance to work space costs, there’s a lot to consider financially when deciding if starting your own business is right for you. Speaking with a financial advisor before taking the leap can provide peace of mind that your needs are covered.
- Small Business Insurance Basics, Insurance Information Institute, 2019.
- 8 Financial Tips for Entrepreneurs Launching a Startup, Entrepreneur, 2017.
- US Flexible Workspace Outlook Report, Colliers International, 2019.
- 11 Incredible Coworking Statistics That Will Make You Leave Your Cubicle, WUN, 2017.
- The Small Business Owner’s Guide to Equipment Financing, Bond Street, 2018.
ALIC48319 (exp. 7/20)