Having a job where you can be your own boss, work the hours you want, stay home, work in your pj’s (if you want to), etc., sounds like to a dream job to lots of people. Who wouldn’t love to escape the commute to and from work? No more being stuck in a bus or train beside someone who’s sick and coughing all over you. No more traffic or weather to fight each day, costing you precious hours and minutes you could be doing something else.
Working from home may sound like a dream job, and in many cases, it is. But there are downsides to working from home too. One of which is the financial costs of working from home when you are self employed. Before you consider leaving your current job to go it alone, make sure you weigh the financial costs of working from home.
It’s easy to forget about paying Uncle Sam his share of your earnings when everything comes off the top and is calculated for you by your employer before you get your take home pay each pay period. However, it’s not as easy to forget when you have to calculate and pay the taxes yourself out of your own pocket from your hard earned money. Self-employment taxes are quite high, and if working from home sounds appealing, you should check with an accountant to make sure you are saving enough for taxes. Although paying taxes isn’t fun (trust me!), keep in mind that it is an indicator that your business is doing well and making money.
One other down side to working for yourself is that you don’t get to call in sick or simply not work if you don’t feel like it. If you take a day off, you’ll likely have to make up those hours (or complete those tasks) before or after your time off. There are also no paid vacations, so when you don’t work, you don’t get paid. If you are planning to take some time off or think you could have an unexpected sick day, you’ll have to have a back-up plan such as working ahead to make sure you still get everything done on time.
Are you working from home so you can save money on daycare costs? Putting your kids in daycare can easily cost $1,000 a month per child. It’s no wonder some parents decide to work from home in order to keep those costs low. The big problem with this scenario is kids need a lot of attention. It can be very difficult to work with kids running around. This is especially true if you need to be on the phone a lot. It’s hard to run a business with kids screaming on your sales calls. The savings can be nice, but don’t forget about the need to run your business or do you job from home.
With the rising costs of health insurance, having even a portion of it paid for you is a major benefit of working for an employer. Unfortunately, if you work on your own you won’t be able to enjoy this perk, and it will hit you where it hurts – your bottom line. You can expect a sizeable chunk of your income to go toward health insurance and other medical expenses, like doctor’s visits, unless you are taking the chance of not carrying any, which I don’t recommend. You’ll also be on the hook for a penalty come tax time if you don’t have health insurance.
You probably already recognize there will be some expenses when running your own business, but you should remember to include not only supplies and higher utility bills, but also equipment and advertising costs as well as anything else you may need to run your business while working from home. Additionally, depending on what type of business you have, you could run into outsourcing costs. Of course, these business expenses can be taken off of your taxes, but they are still expenses that must be considered, and paid for, if you are a business owner.
Sometimes it’s easy to forget there could be a downside to being your own boss and working from home. So, if you are considering it, you should keep in mind how the financial costs of working from home will affect you and your family as well as all of the positives it could bring too.
Can you think of any other financial costs of working from home?