Handling the Uncertainty of Self-Employment

Lemonade standIn my last post about our aim for financial freedom by age 50, I quickly mentioned my transition to self-employment.  It was a bit sudden in the big scheme of things.

Our Jump to Self-Employment

I started my last day job right out of college in June 2005 and expected to work for 30 years or more.  We planned to retire on what we could squirrel away in my 401k, two Roth IRA’s, stock investments, and my husband’s pension as a teacher.  But my online business took off in 2011 and all our plans changed in less than 4 months.

I was self-employed by the end of July 2011 and my husband joined me at home in January 2012.  I would never have dreamed until then that we would put all of our eggs in a self-employment basket, but there it was staring me in the face.  Not only did we need to worry about the normal things like making enough to pay our bills, but we did truly have to change our mindsets in order to function well while working from home.

Changing a Long-Held Belief

I spent the first 25 years of my life thinking that a stable paycheck over 30-40 years paired with great budgeting skills would lead to my own happy ending.  I probably wasn’t wrong, but I never thought about other possibilities.  Even when I thought about self-employment in passing, the idea seemed scary and uncertain.  I’m here today to let you know that beliefs can be changed and success can be found down many different life paths.

The Stability Fallacy

First of all, the stability I felt in my day job was a sort of a lie in and of itself.  I was not guaranteed that position.  They didn’t promise to keep me employed for 30 years.  There was no tenure available.  I had tricked myself into feeling safe.

In 2010 and 2011, that became very clear since the company I worked for started re-positioning itself in its niche and layoffs were happening regularly by the time I left.  I was finally seeing my fake safety blanket for what it was – a job.  Nothing more and nothing less.  It paid me $35,500 a year to show up every weekday from 8am to 5pm and make them money.  I did well and my coworkers were awesome, but I do not know why I ever thought I had a chance of staying there for decades.

Handling Self-Employment Income Fears

Before I took the big leap, I did spend a few months discussing plans with my husband.  As would be expected, our largest worries centered around future income.  Specifically, we wanted to make sure I could fully replace my day job’s income.  When it was clear that $35,500 wasn’t as difficult to replace as we thought, we also needed to figure out how to make an unpredictable income stream feel more stable.

That little task ended up being easier than we thought it would be too.  We decided to create an account just for online income.  We also decided that I would receive a biweekly paycheck from that account just like I did from my day job.  Lastly, we decided to pad that account with online income while I was still working my day job.  Then the account could pay me biweekly even if I didn’t make enough in a 2 week period to cover my set pay.

Our Paycheck Scenario

To be more specific, we created an ING account called “Blog Income” and I didn’t quit my day job until it had $10,000 just sitting around in it.  That took 4 months.  I quit my day job at the end of July 2011 and started receiving biweekly paychecks from the Blog Income account on the same schedule I was being paid on before.  We didn’t miss a beat and the transition was extremely smooth.  We did the same thing when Mr. BFS quit in January 2012.  We just waited until his last paycheck cleared from the school district and picked it up from there.

Stabilizing the Uncertainty

We make more now than we did before, but our income does not pour in equally throughout a month.  There are great weeks and truly sucky weeks.  The padded Blog Income account means that our paychecks can happen like clockwork no matter what, and the great weeks help fill in any money we are ever forced to borrow from that account.  If we notice two pay periods in a row that start eating into the padding, then we’ll know to expand our income streams.  Otherwise, we know we are on track.

This system has worked fantastically for the last year and a half.  I would highly suggest it to anybody needing to handle income instability.  Our bills, budget, and financial goals are all taken care of just like before and we have been able to stop worrying as much about working for ourselves.  This is not to say that we don’t still have concerns, but it takes a huge load off of our shoulders.

Are you self-employed or live on unstable pay systems?  How do you deal with that uncertainty?

“Handling the Uncertainty of Self-Employment” was included in the following carnivals:

Carnival of MoneyPros at Nickel by Nickel
Yakezie Carnival at Financially Digital
Y and T’s Weekend Ramblings at Young and Thrifty.ca
Carn. of Financial Camaraderie at Thirty Six Months

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  1. says

    To be honest, we’ve worked ourselves into a relatively high income/high spend lifestyle so it would be very difficult to chase full-time self-employment. I look at my side income as a nice severance package and/or ability to grow into some additional side income in the event of job loss by increasing time spent blogging/freelancing, etc. But to pull the trigger during my lifetime is probably not realistic, especially given how crowded the PF space is getting.

    • says

      Yeah, our expenses are at an all-time high and I can understand not taking risks when it’s like that. We are actually cutting back a bit just so we won’t have to worry much during bad months.

  2. says

    That’s a great success story. I think more and more people are coming to realize the fallacy of a “stable income”. If the layoffs of the last recession didn’t clue people in, I can’t imagine what would. Government workers are starting to get their notice as well with the sequester. Bravo to you for executing a plan successfully!

    • says

      Thank you! Yeah, it’s hard to feel safe working anywhere anymore. I think funeral homes will always be in business though…and probably real estate.

  3. says

    That’s an awesome start and story. I am self employed with a bit of adjunct professoring on the side but what I really want to do is pivot a bit and shift to being more online. I love helping businesses but there’s only so many meetings I can prep for and handle in a day. I think I’ve got the fears thing covered but approaching how my new system should work and getting it to a point where I can make the pivot is really going to be my next step. :)

    • says

      Jump in on the side and see what you need to do from there. The first step is always the most difficult…then you just figure out what works as you go.

  4. Felix Lee says

    I started self-employment for just more than a year only and I was really reluctant at first. But as time passes by, I was able to handle my fears and uncertainties by doing my best at all times and having to prepare for those low times.

  5. says

    It is tough being self-employed. You have to worry about paying your own insurance, bringing in regular income, etc. It often leads many to not even try but it’s worth it if you put your heart into it.

    • says

      You’re right. I highly suggest esurance.com for insurance though – very easy and we found something affordable. Extra padding helps with the irregular income. :-)


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