On Aridni, we encourage our readers to work for themselves since this is generally the best means of aquiring independent wealth; however, we also need to remain cognizant of the trials and challenges that face the self employed in our society including the burdens of paying one’s own health insurance and life insurance premiums, having no guaranteed source of retirement, and coping with the unpredictablility of each month’s income. Among the most fortunate entreprenerurs, these costs are not an issue, but for those of us who are just starting our own businesses or are experiencing a drop in revenue as a result of the economy, the above can mean the difference between being able to pay your bills or going into debt. That’s why saving and managing our resources is so important.

Take my dad for example. He has been an alternative health practitioner for 30+ years and is widely regarded as #1 in his field internationally. He used to earn over $200,000 a year, but after my mother died three years ago his business slowly started to dwindle and now is falling apart. As of last week, he had depleted the mere $30,000 in his savings account and now keeps saying that he doesn’t know how he will get through the month. Yes, he still earns over $100,000 a year, but after he has paid the mortgage, $500/month for each of three individual health insurance plans, car insurance for two vehicles, life insurance, disability insurance, homeowner’s insurance, $15,000/year for the rent of his office space, etc. there isn’t much left over to save or spend. How can people like my father avoid disaster? If you are an established business owner, I suggest that you make a list of all the costs you have each month and try to put aside enough funds to last you for a year. Do not dip into these savings unless you absolutely have to. You simply never know what may come down the road later on so it’s best to save while it’s easy to do so. In the event that you are just starting out, try to save enough for at least three month’s rent. This may mean not buying that Starbucks coffee you are craving or waiting a little while before taking a trip you planned, but trust me you will be glad you did.

Another thing to keep in mind if you are self employed is the amount of time you need to dedicate to maintaining your business (i.e. recruiting clients) and how much time you must devote to your current tasks at hand. This is where networking becomes cruical. One of my dad’s problems was that once he became “successful” he simply assumed he would always have the same level of clientel and did not devote enough energy to obtaining new patients. So when people stopped being able to see him due to their own financial woes, he did not have people to replace them. Now, he is starting to seriously network again for the first time since he started his business.

While the self employed don’t have to worry about “losing their jobs,” in many ways they have less financial security and less cash flow than those of us who hold conventional jobs. Although they don’t have to pay for the overhead of a personal business, they have more monthly costs to contend with and in today’s world it is becoming increasingly important for these individuals to save not only for their own retirement, but for unpredicted expenses. The CEO of a trade association who earns $200,000 a year has significantly greater cash flow than someone like my dad who has to spend at least half of is income on overhead.

So if you are considering starting your own business, by all means go for it, but don’t forget to take into consideration the obstacles you will inevitably encounter as you start out.