What difference has self-employment made to us so far?

My husband has been self-employed for the last six months, and I have since the beginning of the year.  It has made a difference to us in various ways, both practically and psychologically:

• There is no longer such a thing as pay day, so we have to make sure we end the month with money to pay our expenses for the following month.   We get paid regularly, but not on a set date each month. 
• We are more motivated to build up our savings, in an attempt to make good use of a high earning month, and also because this helps us to feel more secure.
• We have to actively invoice in order to be paid, which still feels odd to me, and to keep track of money coming in from different sources and chase it up if it does not arrive.
• We need to make sure we save a proportion of everything that comes in, to pay tax, rather than this being deducted automatically.
  
• We have to keep track of expenses which may be tax-deductible.
  
• We need to actively make pension contributions, rather than have them deducted from pay automatically.
  
• We have both started to think more in terms of the value of our time; if we want to take time off we have to pay for that by working at another time. We no longer have paid holiday or sick pay.
  
• There is scope for a greater variety of types of work; I'm doing contract work in my industry, but also setting up another part-time business, and trying to write as well as do voluntary work. We both feel more entrepreneurial.
  
• One of us sometimes works at weekends, but we often have a day off together in the week instead; not every day involves an early start.
  
• There is less of a routine; it is possible to forget what day it is.  On the other hand, the dreaded 'Sunday night feeling'  before the start of a traditional week's work is no longer a problem.
  
• If work becomes a bit quiet for a week or two, it can become disconcerting, although having the extra free time is nice. (My husband wrote a detective story during a slightly quiet phase at the beginning of the year.)
  

 

Planning for a decreased, or decreasing, income

One of the reasons I started this blog was because I had decided to change jobs, and do something different. (More on that another time.) I have now left my full-time corporate job, and am working as part-time freelancer for my old employer. So far, the resultant drop in income has been manageable, but I am preparing for the fact that in a few months' time, I may well have no income at all for a time. And my husband works freelance, currently on a contract until mid-May. And when he finishes that, we would like to take advantage of some free time by going travelling for a few weeks.... Hence my heightened interest in saving money.

So far, we've made a few changes, which I've written about here:

-Trying to keep track of everything we spend, on excel. I think that we spend less as a result, and it is a useful exercise.

-Starting a weekly food jar. I mentioned this briefly, and will no doubt write about it more at some point, but allocating a set amount of cash, and using that to pay for all food, is something we've been doing for the past few weeks. So far, it is working well and we have stayed within budget each week, and quite enjoyed the process.

-Reviewing all our regular outgoings more stringently, and making another attempt to cut, or reduce, those that we think aren't really necessary. (Having read more about pet insurance, I cancelled that, as it is true that I cannot envisage a situation where we would be able to actually claim on it. However, the cat may now develop a rare disease needing expensive treatment....)

-Saving as much as possible, and in my case making full use of my ability to contribute to a pension, while I can.

I do think that having more time to spend on watching our outgoings and planning ahead, and so far being happier and less tired, means that we 'need' less to live on at the moment. Fewer meals out, less impulsive shopping to cheer me up, more time to plan meals and so on.

If we do end up living on one income for a while, then I'm determined that even if things are a bit tight in other areas, we a) keep allowances, even if they are small ones, for personal spending, and b) that we both keep paying into pension schemes. (His is automatic, and a much more valuable scheme than mine in terms of benefits, but I will keep up a contribution of some kind even if I am not earning.)

Earning extra income: the rent a room scheme

I was speaking to a friend the other day who mentioned that he was thinking of letting a room in his home to a lodger. I mentioned that I vaguely remembered that there was a scheme allowing this to be done tax-free. I have checked on this since, and in fact the 'rent a room' scheme allows you to rent a room tax free for up to £4250 per year. This is possible whether the home is one you rent or own, although if you rent then it is likely that you will need permission from your landlord before sub-letting.

There are more details on this scheme at the direct.gov website, at the link below.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4017804