How to Adult if you don’t have an employer Adulting for you (aka, how to get your financial, tax, and insurance house in order)
For the independent, consultant, freelancer, self-employed, or small business owner.
Whether you are transitioning out of W2 employee-land, just out of college and off your parents’ benefits plan, or with a small time employer who doesn’t provide benefits, here’s the basic ways you Adult for yourself:
1. Find a trusted health insurance broker and get the coverage you as an individual, your family or your small business require.
2. Find a trusted insurance broker (business insurance, disability, life, etc.) and get the coverage your age, business or lifestyle require.
3. If you have any income from sources where you’re not a W2 employee: find a trusted tax accountant CPA to help set up your company structure, set up your bookkeeping system, set up your retirement savings system, stay compliant with taxes, help you strategize your tax structure, and file your taxes.
How do you find these trusted professionals?
Ask any and all other small business owners, freelancers, self-employed and independent people you meet for their recommendations, their advice, and their lessons learned. Go interview a handful of the recommendations you receive, read up on their online reputation, and go with your gut in deciding who to engage.
How do you know what insurance you require? How do you know what company structure you need?
You learn by having a consult with a few of these trusted professionals and seeing what they recommend, speaking with other businesses like the one you run, and by reading the books I’ll list below.
4. Get a handle on budgeting so you can manage your three piles of money:
- Money for the business (overhead, supplies, equipment, software, hiring other freelancers, professional services, etc.)
- Money for your household (food, clothing, housing, bills, vacations, savings, retirement, etc.)
- Money for the government (city, state, and federal taxes)
How do you manage these three piles?
Some people use budgeting software, some use accounting software, some use excel spreadsheets. Some do it themselves, others engage a bookkeeper or accountant. Much like before, get out and talk with any and all other small business owners, freelancers, self-employed and independent people you meet for their recommendations, their advice, and their lessons learned.
And here’s a heads-up about that money for the government. For most folks just starting out, you’ll have a company structure where you have to send that money to the government four times a year. It’s called “quarterly estimated tax” and there are due dates throughout the year. Google “best way to budget for quarterly taxes” and “how to budget for quarterly taxes” to get the lay of the land.
5. Take a weekend to quickly read these basic business/finance books:
- The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen
- Small Time Operator: How to Start Your Own Business, Keep Your Books, Pay Your Taxes, and Stay Out of Trouble by Bernard B. Kamoroff C.P.A.
- Financial Intelligence, Revised Edition: A Manager’s Guide to Knowing What the Numbers Really Mean
- 475 Tax Deductions for Businesses and Self-Employed Individuals: An A-to-Z Guide to Hundreds of Tax Write-Offs by Bernard B. Kamoroff C.P.A.
- Small Business For Dummies by Eric Tyson
- Look for books about being “independent” in your industry or industries. For example, “The Independent Filmmakers Survival Guide” is helpful for us. Your industries probably have equivalent publications, articles, blogs, or journals.
6. And lastly, the very-not-professional tentpole basics you’ll need under your belt for taxes:
- Separate your business spending from your personal spending. (Lots of people open a separate checking account but each situation is different so consult your tax accountant and do what is essential and easiest for you.)
- Set aside a percentage of each dollar you earn for taxes. (A safe beginner’s rule of thumb is to set aside 25% or do what your tax accountant advises.)
- Learn what qualifies as a business expense. (You get to deduct these when you file your taxes so it pays to know them!)
- Set a system for tracking your business spending (your expenses) and your business revenue (the money you make) so you can easily and accurately report all of this stuff when you file your taxes.
- Learn what estimated quarterly taxes are and how to file them.
- Learn about W9s and when/why you would need to issue them. (And remember to do so in future years when/if the need comes up.)
- Learn how and when to use the Safe Harbor Rule for minimum tax payments.
7. Lastly lastly, Google is your friend. Don’t know what a term or action here means? Google it, read three or four articles. Let them roll around in your head for a bit and marinate. Rinse and repeat as you take each step outlined above. Over time a clear picture of how to run your operation will emerge.
About the author:
Hi. I’m Nora Ryan, a longtime independent creative and producer working in media, tech, and design. Learn more about me here.