Art by Jonan Everett
Your employer generally pays tax on your income, but some day, I may no longer have an employer to pay a portion of the taxes on my income. I consider myself a half-entrepreneur, if that’s even a thing. I still work a traditional nine-to-five job during the week, but I freelance and build my own business during my spare time.
I'm a blogger, and I offer freelance writing and virtual assistant services to clients. I'm not crazy about my day job, and I'm definitely more passionate about my side business. However, I haven't been able to bring myself to dive head first into full-time self-employment just yet.
So if you’re in a situation like mine, should you quit your day job? Here are a few reasons why I'm hesitant to do that myself:
- I still depend on the income from my full-time job.
- Taxes are tough for freelancers and small businesses.
- I’m not confident that I’m ready to take the leap.
1. Income From My Day Job
I once heard some advice that you should try living off your business income for a month or so before leaving your full-time job just to see if you could actually make ends meet if you were to become self-employed full-time. But I haven't done that yet, mostly because I still rely heavily on the income from my full-time job.
I lowered my expenses quite a bit, but I still like to make extra payments on my debt. Besides, the income from my nine-to-five job is very stable, which makes it easier to depend on.
I've also gotten used to the benefits of having two incomes. However, that isn't sustainable long-term.
As such, I would ideally like to grow my side-business income to the point that I am bringing home significantly more than what I make at my full-time job. I'm perfectly fine with taking certain risks. I just don't feel as comfortable making the leap without increasing my income a bit more for added financial security.
Need I say more?
Tax rates for entrepreneurs can seem astronomical. I personally try to set aside anywhere from 25 to 35 percent of my freelance income each month, and hope that it's enough when quarterly taxes are due.
Depending on how much I earn, a significant amount of my income goes directly toward paying taxes instead of my savings. This is why I feel I need to earn much more than I currently make at my nine-to-five job in order to become a full-time entrepreneur, since I will no longer have an employer to pay a portion of my income taxes.
I've considered trying to do a few things to reduce my tax liability. For instance, I plan to legitimize my business by becoming an LLC or an S-Corp. I also worked with an accountant last year who advised me on some business expenses that I could deduct from my taxes. Moving forward, I plan to do this every year.
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3. Issues With Confidence
I love hearing success stories about entrepreneurs who took a big leap of faith, quit their jobs, and started their own business with no Plan B or very little in savings.
In reality, I don't think my story will be similar, because I'm a major worrywart. I like to have a detailed plan in place, with several backups and escape routes before I make any life-changing decisions.
I also have moments of doubt when I question my abilities. Sometimes my nerves get the best of me and I wonder, What if this doesn't work? What if I don't like it or can't earn enough to make ends meet?
Since I have a family to consider, as well, and I’m currently working my way out of debt, my biggest fear is that I will let them down or have to go deeper into debt to meet all my regular expenses, not to mention the ones that go along with starting and running a business.
Deciding Whether You Should Quit Your Day Job
Even though I lack confidence sometimes, I am getting better at getting rid of that mind-set little by little. I love the work that I do and the impact it has on others.
I'm so passionate about my business that I gladly wake up at 5 a.m. most days and work on weekends get tasks done. In fact, my efforts have paid off; I've made plenty of progress since I first started freelancing over a year ago, and most importantly, I'm persistent and refuse to give up.
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It may be taking longer than I expected because I want to have all my ducks in a row, but I'm hopeful and excited to dive head-first into self-employment when the time is right for me. I'm just not there yet.