Ed note: Do you think of working for yourself as being a risk? David Ning sees it differently – he has experienced many positive results from becoming a freelancer.
Many people questioned my decision to give up the steady paycheck in the midst of the worst financial crisis of our lifetime, but trying to turn my side business into full time income turned out to be the best financial decision I have ever made. I never knew at the time, but there are many financial benefits to being self-employed, and I encourage everybody to start a side gig because of them. Here are some of the perks I discovered along the way.
I can deduct taxes on spending that would actually enhance my life. Uncle Sam allows the self-employed to take a tax deduction for expenses that are necessary and ordinary to running the business. That’s why I can deduct some of the expenses incurred on my upcoming 3-day trip to Las Vegas, where I will be attending a conference for the full length of the stay. Obviously, I cannot deduct everything. The cost of attending a show, for instance, is nondeductible because it has nothing to do with my work. On the flip side, the cost to get to the city will be deductible, as are the accommodation costs.
The self-employed can take advantage of the generous retirement account limits. A freelancer can defer taxes for up to $53,000 in earnings this year by contributing to their own 401k or SEP IRA. The savings will depend on many different things, but the difference can be enormous when you add up the savings from the lower tax rate in retirement, plus decades of tax-free compound growth.
No more commute costs. My former colleagues like to give me a hard time when they mention that my commute is about a minute because I work from home. And guess what? I’m happy to let them tease me. Gas prices have gone down by quite a bit lately, but I’m still saving hundreds of dollars every single month on gas because I don’t drive that often anymore, not to mention I make fewer trips to the car mechanic. In fact, even my car insurance is cheaper these days because I applied for the low mileage discount.
I haven’t bought expensive formal clothing in ages. I could get away with worn out causal clothes while I worked the 9-5 shift, but sharp looking formal wear was a must when I visited my customers during my corporate life. I’m happy to report that I don’t really need to dry clean my clothing anymore, nor do I need to consistently get new shirts because the old ones look too worn out. I still attend face-to-face meetings these days that require me to dress up a bit, but the frequency is so low that the suit I bought a few years ago still looks practically brand new.
Impulse spending is a thing of the past. I was pretty good about not making purchases to relieve my stress, but I remember buying a ton of Frappuccinos at airports and service stations because I felt miserable during those grueling airport connections and long drives that my sales work dictated. I still get the wonderful, yet overpriced, drinks these days, but only when I fully enjoy the experience.
I’m much healthier these days too. Speaking of long drives, I stumbled on the fact that having fried chicken relieves the throbbing headache I sometimes get after a few hours of driving on the road. Naturally, I constantly ate the unhealthy food. Coupled with the stress that came with the job, I gained twenty pounds and constantly got sick. I can still feel stressed out these days, but I actually have time to exercise now. The financial benefit of reduced sick visits to the doctor is enormous, but the long-term health benefits are incalculable.
Our family can travel off-season. One of the perks of working for yourself is that you can work whenever you want each and everyday as long as you make up the time somewhere else. For instance, I can go have fun during a weekday because I can simply get the work done at night, or over the weekend. This is great for traveling, because everything is so much more expensive during peak season. I remember staying at a very nice hotel in Las Vegas for $118 per night once, and almost falling out of my chair when I saw an ad for the same room for $650 per night during Christmas. Can you imagine cutting all your vacation costs by a fifth?
I actually save money on everything our family buys. I’m not as stressed out, and I have more time nowadays. That’s why I have the desire to look for discounts whenever I shop. Price comparison, waiting for a deal and using a coupon are all much more pleasant experiences for me these days. I’m also saving by eliminating stuff that doesn’t actually change my life. For example, I cut out cable because I realized my life was actually better once I stopped being a couch potato. If I was working, I simply wouldn’t have the energy to give the no channel surfing life a go because I just thought everything our family was paying for was necessary.
Being a full time freelancer isn’t for everybody, so I never recommend just quitting gung-ho and assuming everything will work out. What I do suggest is for everybody to start a side business while they are still making regular income. Those who become successful can decide if they want to quit then. You never know, because this very move can change your life. It changed mine.
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