Watch Out for the Financial Hazards of Running a Home Business
I love working at home, especially not working for anyone else. The flexibility is a delight, and through the years I’ve learned to be more and more accountable to myself.
But when it comes to home business finances, you are responsible to more than just yourself. There are taxes to consider as well as the impact on your family’s earnings overall.
Home Business Income May Be Irregular
One of the nice things about traditional jobs is that you generally know what you’re going to earn. If your boss cuts your hours and you’re paid hourly, you know you’ll earn less, but for the most part there aren’t a lot of surprises.
Run a home business, on the other hand, and your efforts do not always correlate with what you earn. Sometimes earnings drop for no reason that you can see.
It may be that all your clients just happen to not need you right now. Or maybe the search engines aren’t favoring your site just now. Or you need to tweak your marketing copy.
There are a lot of possibilities out there, and you don’t have direct control over many of them. All you can do is keep working and try to bring the money back in.
Pay Attention to Taxes
It’s vitally important that you pay attention to what you are paying in taxes. When you are self employed you are responsible for all your taxes and Social Security payments. If you earn enough, you have to make quarterly payments. Paying them off each year on April 15 is not good enough… unless you enjoy paying penalties.
The dates can be a bit tricky until it becomes routine, as they do not exactly coincide with business quarters. April 15, June 15, September 15 and January 15 of each year are the important dates to remember in the United States. If they fall on the weekend then it’s the Monday after.
It’s a great idea to talk to a tax professional about your situation. Much better to have some idea of what you need to do right now than to wonder what went wrong as you try to file your taxes. If you can find one who specializes in home business and self employed people, so much the better. They will better understand your needs.
Retirement Account? What Retirement Account?
It’s easy to not think about retirement when you have to do all the planning on your own. This should be as important to you as saving up for your quarterly tax payments. And you do have options to plan on your own, no employer account required. You can do a solo 401(k) and/or SEP-IRA, for example. Research and decide what will be best for you.
The Health Insurance Blues
I’m lucky. My husband has a job and so we have health coverage through that. I don’t have to find it on my own.
Not every home business owner has it that easy. If you need to get health coverage for yourself and/or your family on your own, be prepared for the expense and figure out what is best for your needs.
When my husband lost his job earlier this year, we were very tempted to go without as he hunted for a new job. The COBRA ran about $1200 a month, which is painful. But just to be sure, we stuck with it.
Considering I got pregnant during that time, I’d say it’s a very good thing we kept ourselves covered. You never know what will happen in life. Finding some sort of health coverage, even if it’s just for emergencies can save you a lot of money if that emergency happens.
Have you run into other financial hazards working at home?