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Will I Get Cheap When I Become Self-Employed?

So I’m moving out to California and am planning on being self-employed for the foreseeable future, though I’ll be applying to jobs and hopefully have some good news on that front. With a healthy emergency fund and a steady income coming in from blogging, I am set up well for someone who’s quitting there job with no future prospects.

I’m not worried about not having enough money because I know I will make enough to cover expenses and then some, but I can’t always count on that income coming in, can I?

My main concern is that I will want to squirrel away as much money as possible so that I can protect myself from disaster should my blogging income not keep up the way it has the past few months.

I like living below my means, but sometimes I take it too far. Will I not want to eat out? I’ll be able to afford it, but I don’t think I’ll want to spend it.

With a steady job, it’s easy to see how allowances like that are allowed on a regular basis, but when the income isn’t as guaranteed, how should I handle it?

At what point will my emergency fund be big enough for me to not be stingy? 3 months of expenses? 6 months? 12 months?

I’m very excited to be self-employed. I will get to set my own hours, work on my pet projects, and have time for the things I want. But will I be afraid to be myself and spend any money?

Readers, what advice do you have for me? Should I try to live my normal life? Or should I save as much as possible for later?



  1. I’ve been in a very similar place and your fears are pretty valid. Having an irregular (and not guaranteed) income definitely made me pinch pennies and squirrel away more cash even though I ended up making more than I did at my previous job.

    Rationally, an 18 month emergency fund should have you covered (I had a big one so if I hit a lean patch I wouldn’t be eating through the money for real emergencies). But I had a hard time letting go even after hitting that mark. So I don’t have any wisdom except that maybe being aware of this going in you might be more able to strike a balance.

    If you still want to save more consider a solo 401k. You can shovel away a huge amount of cash and it works wonders on your taxes.

    • @No Debt MBA, The solo 401(k) is a great point, I think (haven’t investigated this at all, but it sounds right) that by investing here, I not only get to defer taxes, but I’ll completely avoid the 6.2% self-employment tax, no?

      • @Daniel, unfortunately (to the best of my knowledge) that’s not the case. Like your contributions to an employer 401k you have to pay FICA or self employment tax first. That would also be true for a SEP or SIMPLE IRA. Fidelity gave me a great little worksheet to figure out the maximum contribution to my solo 401k since it depends on how much SE tax you pay.

        • @No Debt MBA, Ah, got it. I guess there’s no avoiding the tax man is there (it never crossed my mind that 401k contributions would be taxed first). Thanks for the helpful info!

  2. It’s great that you’re moving to sunny CA. Have you cost compared your expenses from your current city to your new city? I’d say squirrel away as much as possible, but not to the point where you’re miserable. You’re going to want to explore your new town a little bit – and there’s lots to do here.

    • @Little House, Expenses will be slightly higher due to not having a roommate (but I’ll save in other ways). I’ll need a car which will skyrocket expenses, but I’m hoping to be able to put that off until after I get a job, at which point the monthly expenses won’t scare me much.

  3. Hi Daniel, have you incorporates yourself yet? You might as well deduct all the expenses as you can!

    What is your wife going to be doing there again? Can you just live off her income and blog for a long while first? Just ge on her company insurance yeah?

    What field are you applying for

    • @Sam, I haven’t incorporated, but even as an individual, I deduct all the expenses I can!

      She’ll be working/in school for the next few years. While living off her income would be nice, that’s not realistic right now. So I’ll live off the blog money and get put back on my parents insurance actually (new healthcare changes actually help me!).

      I’d like to get into search marketing (maybe become an ‘advertiser’) and help companies improve their search rankings.

      Thanks for the support!

      • @Daniel, Cool that you can get back on your parent’s insurance for relatively cheap it sounds like!

        Good luck in the job search. Will be fun to read about and I’m sure there are those with connections out there who can help make intros too.


  4. There are a lot of things that are free or relatively inexpensive. Driving in Los Angeles is not one of them. Take your time getting used to the differences. There will probably be some surprises so don’t go hog wild.

  5. Since you have a healthy emergency fund, I say try to live as normal as possible. There’s so many great things out here in California. You can miss out if you’re too cheap.

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