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Call Dundee

01382 401084

Call Carnoustie

01241 855099

Self Employment – Is It For You?

There’s a lot of plus points about being in paid employment and there’s a lot of plus points about self employment. It would be nice to say that which one you choose should be a matter of preference, but these days job-market forces mean that it can be a wise move to be at least prepared for the prospect of having to earn a living on a self-employed basis, even if it’s not something you would want to do over the long term. So what does this mean in practice?

Less debt equals more options

This is arguably very true in any and all areas of life, but is a crucial point for the self employed and, in particular, for those who have only recently become self employed. Not to put too fine a point on the matter, lenders prefer people who have reliable incomes over people who may or may not have any income at all from one month to the next, which is a risk of self-employment. Therefore, if you are currently in a job, paying down debt as quickly as possible, particularly high-interest debt such as credit-card debt, should probably be a priority in any case and all the more so if there is any possibility of you going self-employed.

The mortgage question

If you bought a home recently then you will probably already have experienced the stringent checks carried out by lenders, which are intended to ensure that you can make your repayments over the long term, regardless of lifestyle changes. Those with mortgages should think particularly seriously about making the jump to self-employment and should ideally have a substantial cash cushion. Those who’ve had their current mortgage for some time may wish to look and see if they can get a better deal now, while they are still in employment and potentially go for a fixed-rate deal so that they can budget consistently or look at options such as “offset mortgages” which allow for greater payment flexibility. Renters might want to think long and hard about buying a property at the same time as going self-employed, but if you are absolutely sure this is the right route for you, then it is usually best to secure your mortgage while still in employment.

Pensions

As a self-employed individual, you will not get access to a workplace pension at all, let alone one into which your employer makes extra contributions. If you are transitioning into self-employment from work then you may want to make the most of your workplace pension scheme while you still can and also, potentially, start making some form of retirement provision outside of work. Once you are self-employed, there are various ways you could approach retirement planning, of which a private pension is just one. Because of this and because of the importance of making the right decision for you and your personal situation, it could be a very good idea to get some professional advice here.

Insurance

There are basically two aspects to insurance for self-employed individuals. One is insuring yourself, so that you and your loved ones can manage in the event that your ability to work is impaired for any reason. The other is double-checking that your possessions are adequately insured given your new circumstances and the fact that, particularly in the early years, you are likely to find it more of a challenge to take out credit. The first point includes looking at options such as medical and dental insurance, income-protection insurance and critical-illness cover. The second includes points like double-checking that your current home insurer is fine with you working from home (if this is your plan) and considering taking out pet insurance (if you haven’t already) to ensure that a vet’s bill can be paid even if you’re in a lean period.
Dental and pet insurance are not part of the Openwork offering, reference to them is included in this blog for general information purposes only and Openwork Limited accept no responsibility for this.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE