Taking the leap from traditional employee to solopreneur involves a number of decisions and considerations that may come as a surprise if you’ve always been on someone else’s payroll. Being numero uno for every part of your solo enterprise can illuminate just how complicated it can be to keep any kind of business running.
Unfortunately, becoming a solopreneur can complicate your personal financial choices as well. That’s because money habits that felt innocuous while you were on a biweekly pay schedule can create financial mayhem on an irregular income.
Whether you’re considering becoming a solopreneur or have been rocking the solo business world for a while, make sure you don’t carry these common paycheck habits with you into your entrepreneurial venture.
Ignoring your bank balance
Prior to becoming a teacher, I worked a series of low-paying jobs, including several stints where I stitched together multiple part-time positions. During that period of what we might generously describe as my “early career,” it was my habit to check my bank balance daily.
This was in the early 2000s, when the internet still required a kerosene-powered modem to access Google, so it took some effort on my part to indulge in this habit. But since I was making so little money, I needed to know on an almost daily basis what was happening in my account to make sure I hadn’t overlooked anything.
When I started teaching and bringing in the medium bucks, it was a relief to only check my bank balance when I paid my bills rather than every single day.
As a public school teacher, I knew exactly how much money I received in each paycheck, I knew exactly when it would clear my account, and I knew that if my mental accounting was off by a little bit, I didn’t have to wait long for the next paycheck. (Ironically, the only time I’ve ever overdrawn my account was during the regular-paycheck years of my life.)
Befriend your banking tools
Becoming a solopreneur is a little like going back to your early twentysomething career, at least financially. Keeping a weather eye on your finances is the only way to stay ahead of problems before they blow up. There’s no steady paycheck to smooth over any issues.
The good news is that banking technology has come a long way since I had to keep my modem’s kerosene tank full just to log onto the internet. These days, virtually every bank and credit union under the sun has an app that will allow you to set up personalized alerts and text notifications, among other tools.
This makes it very easy to set up regular bank balance check-ins, whether you create an alert to notify you when your balance dips below a certain dollar amount, or you have your bank text you the current balance every day at the same time.
Waiting for tax season
Paying taxes is no one’s idea of a good time—but at least when you’re working for a paycheck, the taxman knocks but once a year.
Whether you use a CPA or do them yourself, taxes are fairly straightforward for those who are traditionally employed. Once you have your W-2 in your hot little hand, you can typically get started sometime in early spring, then patiently wait for your tax refund to arrive . . . and you’re done until next year.
But solopreneurs don’t get the luxury of treating taxes like a sucky annual holiday. Because small-business owners don’t have taxes withheld from their income, they have to pay quarterly estimated taxes, filing each payment with Form 1040-ES. The approximate due dates for each payment are as follows, but they may be pushed back if the 15th falls on a weekend or holiday.
- First quarter (January 1-March 31) Due April 15
- Second quarter (April 1-May 31) Due June 15 (June 16 in 2026)
- Third quarter (June 1-August 31) Due September 15
- Fourth quarter (September 1-December 31) Due January 15
Solo business owners also typically have to deal with much more complicated tax reporting if they have multiple clients. That means they are fielding more tax forms—such as 1099-NEC and 1099-K forms—than traditional employees.
Build tax infrastructure into your business
Paying and organizing solo business taxes are overwhelming if you only think about them when there’s a due date. But they can be an easy part of your daily routine if you build tax infrastructure into your business plan.
For quarterly estimated taxes, it starts with planning ahead for paying Uncle Sam. You can do that by creating a savings account where you transfer about 20% of each payment you receive. This will ensure that you always have the money you need to pay your estimated taxes each quarter, so you’re not scrambling to find the cash every three months. Over time, you can adjust how much you set aside for taxes as needed.
As for organizing your taxes, this can also be a relatively simple and ongoing part of how you conduct your business.
It’s important for solopreneurs to have an accurate account of their income, since it’s always possible a client will make a mistake on the 1099 they issue. An invoicing structure where you record income from specific clients at the same time you mark their invoices as paid can be a small tweak that will make tax organization much easier. This could be as simple as a Google sheet that you keep updated, as long as you are consistent.
Taking no vacation days
When you work a traditional job, it can be easy to forget to take time off. Whether you get a set number of vacation days per year, or your workplace offers unlimited PTO (which really means you get the hairy eyeball if you try to schedule any), it’s easy to reach the end of December before you’ve realized you never took a vacation.
This is obviously a serious problem within the American workforce, which is suffering from burnout, lack of work boundaries, and a bad case of the Mondays.
While none of that is good, many workplaces do at least offer regular time off in the form of weekends and federal holidays. Workers who habitually leave their vacation days unused can still count on several long weekends and other breaks throughout the year to give them a needed opportunity to rest.
Block off time for rest
Working for yourself means you don’t have to stick to a 9-to-5 schedule, but it also means you might be working at midnight, on weekends, and through Thanksgiving dinner. The habit of working without a vacation can be especially tempting when your success or failure depends on your hustle.
But you’re solely responsible for your business now, which includes the well-being of your only employee. You can’t rely on the holiday calendar to provide you with time away from your work like you did as a paycheck employee. You have to set the boundaries—or deal with the consequences of burnout. Which could mean not being able to work at all.
This is why you need to set the boundaries your previous schedule gave you automatically. You can do this by blocking off time weekly, monthly, and annually for rest. If you need to, imagine that your rest times are legally mandated so that you’re not tempted to work through your vacation time anyway.
Building better habits
Working for yourself, by yourself, doesn’t just require a change in how you structure your work day—you may also have to revamp your personal financial habits.
Without the safety net of a steady paycheck, solopreneurs can’t afford to ignore their bank balances like they did as an employee. Your bank’s mobile app and online tools can help you keep track of your finances with automated alerts and notifications.
While paycheck employees get to think of taxes as a single season of the year, solopreneurs have to deal with tax chores year-round. That includes paying quarterly taxes and keeping records organized. Setting aside around 20% of each payment can help solo entrepreneurs have the money they need to pay their estimated taxes every quarter, while recording their income as the invoices are paid can help make tax reporting easier come April.
And though all Americans need to take more time off, those working traditional jobs can often count on weekends and federal holidays, even if they forget to use their PTO. Solopreneurs can get stuck in an endless working cycle unless they specifically block off regular time for rest—and guard it fiercely.