Want to make self-employment work for you? Consider these tips

Q: It’s time! I’m 50 years old, and I’ve worked for others all my adult years. Self-employment is on my horizon for 2024. I have skills in a very special “helping profession,” and my niche marketing plan is in place. My budget is complete, and the line of credit is in place. Now I want advice on how to handle and report the financials. — Charles in West Melbourne

A: Self-employment is a bit like Charles Dickens’ famous quotes because it may be “the best of times, or the worst of times." Most of all, this is your time. Always remember that “no one is useless in this world who lightens the burdens of another.”

A recent study reported that Florida has the highest percentage of small businesses in America, so you have lots of good company.

Don’t overextend financially when you start the business; start small, stay frugal and follow the business plan.

Compare your line of credit with a business loan. If you’re using the line for short-term working capital, it may be less expensive and more flexible. If the loan is for a capital investment, a fixed interest rate may be cheaper.

Look into business liability insurance, even helpers can get sued and the cost of defense may be a budget breaker.

If you are ready to hire, consider part-time people who may not want benefits and may appreciate the flexibility you can offer.

Pull the IRS Form Schedule C and get the list of expenses that are deductible from your business income. It starts with advertising, and then there are auto expenses that have a standard mileage rate at $0.67 per mile for business in 2024. Keep a log if you are using your personal vehicle.

If you’re considering new wheels, the section 179 expense limit increased to $30,500 for sport utility vehicles.

Office expenses, rent, mortgage expenses, repairs and maintenance, taxes and licenses, and legal, insurance and professional expenses are all deductible, along with business travel and meals.

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Keep a cash stash close and liquid, so you can pay your bills when income is sparse. Open a business account with transfer privileges and move cash to/from your personal account where it earns interest. Income taxes are based on income earned and expenses paid, not bank balances.

Assuming you have a profit, you can start a pension plan, profit-sharing or retirement plan. This is where it gets interesting. You can fund an IRA with $8,000 or, if you don’t have W-2 employees, fund a Solo 401(k) up to $76,500. Better yet, with enough income, you can set up a defined benefit plan and contribute as much as $200,000. Now that’s fun!

Hire carefully and ask your accountant if the employee qualifies as a 1099. Knowing that W-2 employees usually get benefits including Social Security tax, income tax, Medicare tax, retirement plans and health insurance, it’s smart to start small with independent contractors who may cost more in hourly wages, but will actually cost less without benefits.

Most importantly, hire people who complement you. Know what you do best, what you don’t do as well, and what you don’t want to do. If you’re like many entrepreneurs and find yourself at the 50,000-foot level, find a coworker who will take care of the details. That’s where the devil is.

Create a list of your strengths and weaknesses, define your competitive advantages, and develop repeatable systems and processes. Continuously review them and look for opportunities to improve. Technology is probably your best friend. Diversification doesn’t fall far behind; having a single large client is a risk that should be mitigated.

Be frugal, especially with office space. If it’s not necessary to rent space, meet customers at the coffee shop or the park. If an office is needed, rent a conference room. Few clients or customers are impressed with expensive buildings; they know they’re subsidizing them.

Your mission statement is your mantra; it explains your company’s purpose, values, and goals. Keep it handy and review it often. Focus on what really matters and adapt as circumstances change. And they always do.

Many “helping businesses” operate in an environment where it’s all about trust. Your mom was right, your reputation is your most valuable asset; it precedes you before you walk into the room and lingers long after the work is done.

Mary Baldwin, CFP®, is a fee-only financial planner at Buckingham Strategic Wealth in Indian Harbour Beach. Contact her at 321-428-4555 or mbaldwin@buckinghamgroup.com.

Source: *Corporatefinanceinstitute.com. For informational and educational purposes only. Individuals should speak with a qualified financial professional based on their own circumstances to determine if the above is appropriate. The opinions expressed by featured authors are their own and may not accurately reflect those of Buckingham Strategic Wealth® R-23-6470

This article originally appeared on Florida Today: Self-employment is great: Here are tips on making it work for you