Finding Security in Self-Employment

There may be security in a regular job, but you can certainly build your own kind of financial security when you're self-employed.

New York, NY (PRWEB) June 29, 2004 -- A report published this spring by the AARP Policy Institute found that 10.2 percent of U.S. workers are self-employed--that's 13.8 million people. Certainly many of them have found ways to replace that security of having a job. And if comments from the Armchair Millionaire community are any indication, many of these people are very glad to be running their own businesses--and have found their own sense of security. This comment is just one example of that:

"I've worked for myself for over 12 years as a jewelry designer. In the beginning my reason for being self-employed was the flexibility in my work schedule and the creative expression it allowed. Only until I felt comfortable with the money situation--after three or four years--I realized how much financial control I had. If I needed more money I just needed to work a little harder and when the money was flowing well I could take a little more time off." --Julie

Given today's economic landscape, job security today just isn't what it used to be--fewer and fewer firms are offering pension plans, many are cutting back on medical benefits, and outsourcing has caused all kinds of once secure jobs to be shifted overseas. So depending on your specific situation, you may be giving up less security than you think. But regardless, there are many ways to build your own kind of security through self-employment. My checklist will show you how to maximize that security.

The Armchair Millionaire's Checklist for Secure Self-Employment

Choose the right kind of business entity. While the sole proprietorship is the old standard for self-employed people, more and more are turning to more complex business structures for the tax and legal advantages they can offer. These include limited liability companies (LLCs), S corporations and even C corporations. Contact your local office of the Small Business Administration (www.sba.gov) to tap into its numerous resources for business start-ups.

Max out a retirement plan. Uncle Sam is very kind to small business people when it comes to retirement plan options, offering some great ways to save for retirement and trim your tax bill at the same time. SEP- IRAs are the easiest and simplest to set up and administer, with SIMPLE-IRAs following a close second. Both have contribution limits that are far higher than traditional and Roth IRAs.

Get your tax breaks. When you're self-employed, you get to take advantage of a whole slew of tax deductions that you could never get as an employee--but they all have to for expenses incurred for the business and you'll need to document them well. Have a good CPA on your side to help make sure that you get the deductions to which you're entitled and to navigate the other aspects of tax law which will affect your business.

Get health insurance. It seems that this would be a no-brainer, but studies show that self-employed folks are much less likely to have health insurance than regular workers. Check with a good insurance agent--you may be eligible for group insurance, or you might be able to obtain insurance through a professional organization.

Build equity in your business. Many entrepreneurs focus only on maximizing their current income, but don't neglect to build equity in your business as well. Having something worth selling when you want to retire or move on to something new will provide you with an additional layer of financial security that you could never get working for someone else.

THE BOTTOM LINE: There's financial security to be found in nearly any employment situation--if you know how to build it. You'll have to work a little harder for that security when you're self-employed, but the personal and financial rewards can make it well worth while.

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Lewis Schiff is a contributor to CNNfnMoney.com, the Web sites for CNN and Money Magazine. His newest report, "How to Know When You Are Rich" is now available at www.armchairmillionaire.com.

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Lewis Schiff
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