So You Work For Yourself — Are You a Boss Yet?
By: Seth Gilleran
Tags: Digital Nomads, Freelance, Money Management, Self Employed, Finance

A burgeoning subsection of millennial demographic is the self-employed market. I’ve been self-employed in one way or another for 7 or 8 years because I sold insurance and commissions jobs are typically some variation of self-employed. However, I’ve noticed as gig apps (DoorDash, Instacart, Postmates), OnlyFans, online advertising start-ups, even small-scale monetized hobbies, etc gain traction in the market, more and more people my age are becoming self-employed.

If you think credit is poorly explained in America, self-employment and the resulting taxes are right on par, if not worse. It’s up to the worker to withhold taxes (about a third of everything you make to be safe), track mileage and deductions, and pursue legal status as an LLC or self-proprietorship for preferential tax treatment.

There are apps that do this piece or that, but none that I have found that do it all. Worse, most newcomers to self-employment don’t know they have to do anything differently than they ever have. Imagine going from a comfy little refund at tax time every year to a $5,000 bill owed to the IRS. That was my first year of self-employment because even though I worked for my family, no one told me to withhold, and I doubt I would have been good enough at saving to do it at the time anyway.

Apps like Indie and Oxygen are creating accounts that specifically benefit this niche market. Indie automatically withholds and I believe helps users plan for benefits like health and auto insurance (something else confusing that self-employed people are responsible for doing on their own). Oxygen has personal and business accounts with business credit available. For self-employed people with bad personal credit but legitimate business use for a credit card, this is a good opportunity to have credit for emergencies, gas, resources, and expenses.

They also will incorporate you as an LLC for $250 (depending on individual state filing fees, but about there). Being an LLC (limited liability company) is super helpful for self-employed people because as the name suggests it relieves the individual of the business’ liabilities (tax, financial, legal, etc). It’s worth noting though that if listed as an LLC, it’s important to manage money properly because you legally aren’t supposed to commingle business funds with personal at that point. (The same is not true of self-proprietorships, but while there are a few advantages, I don’t personally recommend that classification for overall liability reasons.)

Whatever classification you use, I recommend using TurboTax at tax time. Tax accountants will charge you exorbitant fees PER tax form (I paid over a grand in just accountant fees one year before I figured this out). If you’re like me and have four or five I-9’s or W-4’s coming in a year, that adds up QUICK. TurboTax simplifies it to point-and-click — telling you exactly which info to put where, checking the info for you, and making sure you have the best refund possible. I promise it is SO EASY, and if you aren’t sure of yourself, you can pay a little extra out of your return to have an expert check your work and guard you against future IRS audits. Remember that you can save your completed return to your computer before submitting it through TurboTax and submit it via the IRS’ free submission tool, or mail it in for free.

What can you do on your own time to make self-employment easier? Track your miles and business expenses — I love the Quickbooks Self-Employed app because it pairs with TurboTax, but Stride offers a mileage tracker for free to Postmates drivers and others. Get the benefits you deserve — as your own boss, you’re in charge of arranging healthcare, dental, vision, business liability insurance, short-term disability, and vacation. Sound like a lot? I get that; it kind of is, but that doesn’t mean it has to *cost* a lot. This need is why budgeting, saving, and understanding your finances comes in clutch for self-employed people.

For healthcare, use your state’s Affordable Care Act marketplace to get a plan with price adjusted for your income. If looking at it yourself online is overwhelming, they all have numbers to connect you to a licensed agent who can help decide what you need and find you a plan where you can still see your same doctors.

Adding dental or vision (even on their own) is shockingly cheap. I went with a United Healthcare vision plan because I wanted my allowance to work with Warby Parker, who I’ve had the best glasses-ordering experience with out of all the online merchants, hands-down. Most other plans will work at Eyeconic though.

Business liability insurance protects you from liability in the event of an accident at work — say you accidentally hit someone’s mailbox while you’re delivering, your normal auto insurance won’t cover that because it was in the course of business. What if you delivered medicine to the wrong house? Mishandling medical information could be an expensive legal headache, but a good “gig worker liability plan” or “freelancer liability insurance” will provide you with legal and financial protection.

Short and long-term disability plans are ESSENTIAL. As a self-employed person, you don’t have access to Family Medical Leave, so if you get too sick to work out of nowhere or have a debilitating accident, your income will come to a stop immediately. A short-term disability plan provides income replacement (they send you regular checks until you’re better) for a short period of time (typically up to one year). What if it’s a really bad accident though, and you won’t be able to return to work for a long time, or ever? Here’s where long-term disability comes into play. If you’re going to be permanently or long-term disabled (and the exact definition of disabled will vary by policy), one of these plans will continue those (typically monthly, sometimes weekly) payments for as long as you’re disabled or until the policy reaches its limit.

As for vacation, it really depends on what your self-employment looks like. If you work remotely, get a hotspot or wifi connection and hit the road (stay tuned for my digital nomad info-spectacular). If you don’t, you’ll want to have a savings buffer built up before you book time off ($500 is a good figure off-hand, but one month’s bills is even better). That isn’t counting vacation expenses, this would be $500 completely extra from what you’d spend on/for vacation. Be realistic with yourself about what’s financially achievable in a vacation — maybe start with a weekend at the lake before working up to that European backpacking trip you’ve been planning since high school. The important thing is getting away and taking care of yourself for a bit — you’re the only one greasing your wheels, and you’ve gotta keep ’em spinning.

Overwhelmed? Head spinning with things to keep up with? Congrats, that feeling means you’re self-employing the right way. Don’t worry, in a few weeks, planning for yourself will start to pay off when the things you need to live (medicine, peace of mind, time to yourself) are more readily available than before. When that happens, look at yourself in the mirror, look at the pride on your face, and say aloud “I got this.” The head-spinning stops, and the excited heart-pumping starts. You’re in control now, and the world can’t stop you from earning that cash.