It is important to consider the state of the economy before becoming self-employed.
- Experts have been warning that the US economy could collapse anytime soon.
- That’s important to think about when deciding whether to make the leap into self-employment.
- Make sure you’re in good financial shape (for example, having enough money saved to sustain you for a while) to prepare for a possible economic downturn as a freelancer.
If you’ve been thinking about becoming a freelancer, you’re certainly in good company. There are many benefits to being self-employed, instead of being tied to a single employer.
For one, you can increase your income, while also being able to set your own work hours and work from anywhere in the country (or world) you want. Also, if you have children, you may find that a freelancing setup lends itself to a better work-life balance. Y helps you save money on childcare.
But being self-employed involves some risk. And since financial experts have been warning of a potential recession in 2023 (or soon after), you may be wondering if making the leap into self-employment is really the right choice at this time.
So should you give up your dreams of being self-employed due to financial concerns? Not necessarily. But should you factor those financial concerns into your decision? Absolutely.
Make sure you are prepared for a recession
Generally speaking, it’s a good idea to have a game plan before you quit a salaried position and become a freelancer. That means having some work already done, or at least having a long list of potential clients to market your services to.
But on top of that, it’s important to have a solid level of savings before becoming self-employed. And given the potential for a recession, you Really I want to walk in with a good amount of cash in the bank.
If a recession hits several months after you’ve gone freelance, some, or even all, of your clients might pull the plug on the work you’re doing to cut costs. That could leave you with no income for months. And as a self-employed person, you will not be entitled to unemployment benefits. So in that scenario, you’ll likely become heavily reliant on your own savings account balance to cover your bills.
Now suppose you are going to hire an independent contract with enough money saved to cover a full year of living costs. In that case, you are setting yourself up nicely to weather a recession. So that he can feel comfortable moving forward with his plans. But if he only has enough money in the bank to pay a few months worth of bills, he may want to put his plans to freelance on hold and accumulate more cash reserves.
It is good to proceed with caution.
We don’t know if there will be a recession in 2023 or not. But since many experts seem to think we’re in for one, it’s a good idea to take those warnings to heart.
That doesn’t mean you have to give up being self-employed. But it does It means you have to go with plenty of cash reserves as a back up.
And remember, if being self-employed doesn’t work out in 2023, it doesn’t mean you’re doomed to having a salaried job forever. Instead of getting depressed, keep working on your savings so you’ll eventually be in a stronger place to be self-employed.
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