1662: 4 Common Mistakes Made By The Self-Employed by Michelle Schroeder-Gardner of Making Sense of Cents

[00:00:00] This is Optimal Work Daily. 4 Common Mistakes Made By The Self-Employed by Michelle Schroeder-Gardner of MakingSenseofCents.com I've been fully self-employed for almost a year now, side hustled for three years, and I've learned a lot over this time period. No, I'm definitely not an expert, but I do know a little bit about owning businesses and running them since that's all I did when I had my day job as a business analyst.

[00:00:25] As a quick summary, in my old day job, some of my responsibilities included conducting interviews to learn more about a company and how they operated, analyzing any legal and business agreements, reviewing and or compiling financial documents, including tax returns, financial reports, etc., and so on. When I had this position, I saw some really amazing companies. I saw many companies where the owners completely started from scratch and built multi-million dollar companies which were extremely successful.

[00:00:53] However, I also saw many, many companies that made some horrible mistakes. These companies operated at losses each and every year, and I just don't know how they did it. Even though I run a fairly simple business, all I need is a laptop and internet to work, I'm starting to understand more and more about what these business owners went through in order to get to where they currently are. I've also made my own fair share of mistakes, and I know no one is perfect. Hopefully, though, you can avoid some mistakes. Here are four common mistakes made by the self-employed.

[00:01:23] One, not being organized. This is a very common mistake made by the self-employed. I'm guilty of this one, too. I make this mistake all the time, but I am trying to improve. When you have your own business, you really need to work on being as organized as you possibly can. You need to make sure to keep your personal and business finances separate, receipts organized, papers organized, and pretty much everything you use for when you do your taxes the following year needs to be prepped and organized.

[00:01:51] Keeping everything organized will help everything go much more smoothly when you eventually need the item. It's easy to let each little thing slide, and all of a sudden, your disorganization will take over your life. It might become impossible to find anything, and you might even lose important documents. 2. Thinking being self-employed will be easy Now, this one isn't necessarily too common, but I do think it's a common way that people who are not self-employed think.

[00:02:17] I recently read an article about someone who quit their job and entered the self-employment world because they wanted to do something easier in life. Sadly, they found out the truth was the exact opposite. Being self-employed isn't a never-ending vacation. This is something too many people think. Just because you work for yourself and or at home, it doesn't mean that life is automatically easier. You will need a plan for your business, research about how you will actually make an income, organize your finances, handle the legal side of owning a business,

[00:02:45] manage to not let your business take over your life, provide services, sell products, find health insurance, save for retirement, and so on. Oh yeah, and don't forget about taxes. 3. Not having an emergency fund I have seen too many people enter the self-employment life only to have a few bad months and completely give up. I understand that running a business can be hard, as I mentioned earlier, but I do think having an emergency fund can be a lifesaver in many situations.

[00:03:13] Different people like to have a different amount in their emergency fund. I have a full year of expenses just in case everything completely tanks or if something major happens to either of us or our home. Keep in mind that we do have a $12,000 deductible before we can actually use our health insurance, so we keep our emergency fund extra inflated with a year's worth of expenses because of that as well. An emergency fund can really help if you have a bad month, if something goes wrong with your business plan, or if you have some major expenses coming up.

[00:03:42] Instead of completely giving up on your dream, your emergency fund can help you power through any bad months so that you don't have to quit. Unless you truly want to, of course. And four, spending a crazy amount of money. Luckily, my business is very cheap to run. I don't need much in order to make an income. All I really need is my laptop and internet. Everything else I pay for are really just little luxuries to make everything a little bit easier. When I first started my hustles, I ran it much more cheaply than I run it now.

[00:04:12] I wanted to save as much money as I possibly could. This is not how everyone runs their business, though. I have seen some business owners start their business by spending too much money on items that they probably do not need. Yes, some items are a need, but others can probably wait a little bit until you know you have a viable business plan. Also, some spend a lot of money on their business just so they can write the expenses off on their tax return. Let me say this. Just because you get to write it off does not make the item free. You still have to pay for the item.

[00:04:46] You just listened to the post titled Four Common Mistakes Made by the Self-Employed by Michelle Schroeder Gardner of makingsenseofsense.com And thank you to Michelle who created Making Sense of Sense to keep track of her financial progress, help readers improve their finances, and help her own personal finances. One example, due to this, she was able to pay off $38,000 in student loans in seven months. She lived in an RV touring North America and now lives on a sailboat.

[00:05:14] She and her husband sold their house and became full-time travelers. And like many of the authors on our shows, she went from being in debt to financially free and documents the journey on her blog. She publishes monthly income updates and shares how she earns over $100,000 a month online. She's pretty open about it, so you can check that out. Again, her site is makingsenseofsense.com and a little bit of a play on words there. All right, that's going to do it for today. I hope you've had a great one and I will be back here with you tomorrow

[00:05:42] where your optimal life awaits.