Quitting a Job to Be Self-Employed

by Chris Miksen

Quitting your job to live the life of a self-employed individual can be a freeing experience. But the transition will be successful only if you plan accordingly and have enough money in savings to live off of until your profits begin to pour in. You also must be prepared for the tax differences when you become self-employed to avoid tax trouble.

Living Expenses

You can become self-employed in a split second, but succeeding while self-employed generally takes far longer. While overnight successes do exist, it’s more common for self-employed individuals to waits months before they begin seeing consistent profits. Career coach Antoinette Oglethorpe suggests having enough money to cover your living expenses for at least six months. Six months is generally enough time to set up your business and begin experiencing an influx of revenue. The six month living expenses fund does not cover business operations; it covers only what you currently pay, such as loan payments, credit card payments, groceries and gas.


Before embarking on your self-employed career, you must have a plan to ward off failure. Your plan must detail how you will establish yourself, what marketing techniques you’ll employ, what clients or customers you will target, where you plan to conduct your business and how much your business operations will cost each month. Research is required to answer most of those questions. For example, suppose you’re beginning a freelance writing career and you need a list of clients to target. Begin by scouting out local businesses, especially small businesses that exist only in your city or county. Research what the businesses would likely need from a freelance writer so that you have an idea of how to sell yourself when you approach the business owner.

Tax Problems

Self-employed individuals do not have taxes automatically taken out of their pay as an individual would working for a company. The IRS also requires self-employed individuals to make quarterly tax payments if the individual is expected to owe $1,000 or more on his earnings at the end of the year. Additionally, as a self-employed individual, you must pay a self-employment tax that is a percentage of your adjusted gross income based off a Social Security and Medicare tax. As of 2011, the self-employment tax is 13.3 percent.

No Solid Income

Someone who’s employed by a company generally has a stable income that stays the same month after month. The same cannot be said for someone who’s self-employed. The pay for a self-employed individual can swing wildly from month to month, depending on the amount of work available and number of clients and customers. Varying income can be a problem if you depend on a certain dollar amount each month.

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