The Independent Contractor’s Survival Guide

Following these tips can boost the finances of the self-employed

“I was on the phone talking over my clients’ heads, being a referee, and asking, ‘why aren’t you helping your sister with her homework?’ or ‘why aren’t you helping your sister wash the dishes?’” he says.

He was persuaded to take his independence a step further when the salon’s owner was in the process of renegotiating the rent. He saw the lease and discovered that her rent was only $1,000 a month. He and the other seven stylists paid $1,000 a month each to rent a booth. “Once I saw that, I could see that she could do OK without me,” he says.

Childress spent $10,000 to transform a storage room in his home into a hair salon and moved his business there in December 2004. He saved money by enlisting his daughters to help him paint the salon’s walls with colorful faux finishes.

“As I was setting up, I was dreading having to leave because I had built relationships with co-workers,” Childress says. “It was the best salon I ever worked at, but I realized that I needed to be at home to raise my kids. I always had nightmares about being a young grandpa. We come from a long line of young parents, and I just don’t have that vision for my children and I don’t want them to develop that vision for themselves.”

Since striking out on his own, Childress saves $36,000 a year in overhead since he doesn’t have the booth rental fee, commuting expense, and no longer pays a shampoo assistant. A steady stream of clients and his daughters keep him from feeling isolated. He regularly attends hair shows and takes classes to keep on top of trends and learn new techniques.

Childress and his daughters have subsidized health insurance through Health Net, which offers coverage in California and costs $60 a month for the entire family. Co-payments for doctor’s visits are $20. He has a financial planner and has saved $2,000 toward retirement so far. He has disability insurance as part of h
is Universal Life Plan, along with a plan for chronic and terminal illnesses. “I have all of my insurance automatically debited from my checking account,” says Childress. “I also put money aside for my daughters’ college fund,” he says, although he admits that he has been falling behind. He has only about $1,000 saved for each of his daughters, and $170 a month is automatically transferred into a mutual fund for his 16-year-old daughter’s education. He has $50 a month automatically transferred to each of the accounts of his 12-year-old twins since they have a longer time before going to college.

Since Childress has only been working at home for one year, he hasn’t experienced a great deal of tax savings so far. However, he expects to be able to deduct a portion of his mortgage and utilities, including all phone bills, as well as the cost for buying and maintaining computers, Internet service, and even landscaping.

It’s tough for small business owners and people who work on

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