Part IV: Working From Home - How Much Do I Have to Earn?

Section: 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8

Before you decide how much you need to make, think first of what you need to have. Financial experts recommend that you bank at least 6 months worth of living expenses before you quit your job in the event things don't work out. Other experts recommend at least one year's worth of living expenses saved. Let's face it, you'll feel less stressed if you know you have a financial cushion to fall back on.

After you've saved enough money to satisfy your comfort zone, it's time to start calculating what you need to make using your current salary as a base. From here you will add expenses and subtract savings to come up with a ballpark salary figure to replace your current income. Please realize, this is a decision that should not depend solely on the information gathered here. I strongly suggest you talk to an accountant for expert information and advice that is beyond the scope of this article.

If you are currently employed, take a look at your paycheck. What is being deducted before you get your paycheck? Whether you're getting up to commute to a job, or you're working from home, you're going to have to pay taxes, federal, state and sometimes local. Of course the amount you pay will depend on your tax bracket and whatever perks you might enjoy from being self employed (consult with an accountant).

In addition to taxes, most people secure their health insurance through their employer's plan. Your employer's plan will most likely be much cheaper than what you might be able to secure on your own. There are, however, options. Read our article on individual health insurance plans for ideas.

If you were fortunate enough to have an employer that provided a 401K plan, realize that you will no longer be eligible to participate, nor will you enjoy the employer's contribution. Again, this is something to discuss with a financial planner or accountant to know your options for an alternative savings plan.

In addition to allocating for your taxes and insurance, you will now be responsible for all of your supplies. No longer can you raid the supply cabinet to provide supplies for both your home and your work cubicle. It's all on you now (although some of this may be tax deductible).

Your electricity, water, heat, oil, phone will also increase as a result of your being home and using them. Look at your current expense and come up with a formula as to how much it will increase with you being home. Do you think it will increase 10%, 20% or more? It might take a couple of months to come up with an accurate figure, but it's good to factor this in to get a true idea of your financial needs.

Uh oh, right about now you're ready to change your mind aren't you? It sounds rather bleak. Well, there are some things you can factor back into the equation:

1. Commute: If you are no longer commuting, you can pocket your commutation costs. Your monthly train/subway/parking/gas/tolls/car wear and tear are added back to your income.

2. Wardrobe: Do you still have to wear the same type of clothes everyday? If you can get away with wearing casual clothes most of the time while only having to put on corporate clothes occasionally, you can save quite a bit on your wardrobe.

3. Childcare: This may be an addition or subtraction. You might find that you can get five days worth of work done in four days with all of the time you've gained by not commuting. You might be able to save one day per week in child care. You might need a baby sitter for a few hours rather than full day child care. There is a potential to save money in this area.

4. Morning Coffee: Your daily stop to the local deli or coffee shoppe to get your coffee and bagel add up financially. Now you can make your own coffee at home (for a lot cheaper ) and buy bagels in bulk. You'll realize a savings here.

5. Lunch:Depending on where you live, you can spend quite a bit of money each day eating lunch. Home prepared lunches are usually cheaper and healthier.

6. Social Contributions: How many baby showers, going away parties, bridal showers, engagement parties, birthdays, weddings celebrations are sponsored at the job in any given month? These hidden expenses add up also.

7. Serendipitous Effects:You'll find that by having the freedom to structure your day as you see fit, you just might be able to accomplish some of the chores you previously hired someone else to do. There is a potential to save money here (that's if you feel inclined to perform those chores).

As with any new business or working arrangement, it takes time to become established. Initially you might find that you will have to pull in the belt for a period of time until things start to flow.

If you're currently an at-home parent who is not bringing in an income and are considering starting a home business, the pressures are different. Since there's no income to replace, let's go straight to the what type of business should I go into section.

Section: 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8

ABOUT THE AUTHOR: Felicia A. Williams is a freelance writer and webmaster of this website, Visit Hudson Valley.com and No Job for Mom.com. She is also the Insurance Feature Writer for Suite 101.com

This document last modified Monday, 16-Feb-2009 09:17:45 CST

Tidbits & Stuff was born on Thursday, March 9, 2006
© 2006, 2007, 2008, 2009 Felicia A. Williams

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