But a prospective self-employed – especially one whose financial situation has been made more precarious by a layoff — is wise to test the waters first.  Why?  As Small Business Administration (SBA) legend has it, only about half of new businesses survive past year 4.  This SBA article lists the reasons, but they pretty much add up to one thing: cash flow, cash flow, cash flow.

So how to make sure cash from your new business flows in the right direction?  In the Wall Street Journal article Becoming the Boss Can Cost Plenty, a few who’ve recently found themselves in over their heads share what they’ve learned about launching a start-up and how they would do things differently if they had it to do over again.

Guest blogger Helaine Iris, a professional Life and Business coach, helps overwhelmed small business owners take control of their time and finances so they can double their revenues with less stress. Featured in numerous publications, including “O” The Oprah Magazine, Helaine’s dynamic personal coaching style helps entrepreneurs accelerate their businesses with tools that empower, build financial success and create personal transformation.

Here, in her article “The Illusion of Freedom and 3 Dirty Words That Cause It”, she explains how new business owners can find the freedom — financial and otherwise — they seek from self-employment by rethinking what freedom really means to them.

Just about every small business owner I know wants a successful business because they value freedom. Most of us have been employed at some point in our lives and know what it’s like to work for someone else – you’re accountable to them, all your efforts conspire in the direction of making them successful and furthering their vision.

Remembering what it’s like to be employed by someone else offers a stark contrast that probably contributed to the decision to start your business or downright pushed you there. Your time and freedom are highly valued assets.

You knew starting a business would take hard work, and you would put a lot of time in – BUT you were highly motivated and abundantly clear that ultimately, you would have freedom and you would experience your life on your own terms.

There’s nothing wrong with that mindset – freedom is a wonderful reason to be self-employed but guess what? The value of freedom you hold so dear is unbeknownst to you creating an illusion that’s getting in your way.

Here’s how it plays out. You resist three dirty words — structure, discipline, and accountability – because you think they’re the opposite of freedom! But, here’s a secret all successful business owners know – structure, discipline and accountability ARE the foundational building blocks freedom is built on. Until you stop resisting and make friends with structure, discipline and accountability, you’ll never get what you want – freedom.

For some reason many people have an almost allergic reaction to the concepts of structure, discipline and accountability. They feel them to be authoritative, not spontaneous, and dare I say, militaristic. Consequently, resisting these qualities ultimately leads to lack and is one of the root causes of time management problems – which leads to – guess what? Your lack of freedom.

What do you do about this? You take a good look at your relationship with these words and change your thinking. You get help if you need it putting a plan in place so you can overcome the illusion. But, most importantly you remember to the core of why you want to be self-employed in the first place – FREEDOM – and decide to do whatever is necessary to get there.

It’s YOUR life… Imagine the possibilities!

Click here to receive a free copy of Helaine’s report “Learn How to Finally Break Through Overwhelm, and Become a Prosperous, Stress-Free Business Owner”.

Image by David St. Germain

For the last couple years, probably for obvious reasons (“It’s the economy, stupid”), this blog has focused on unintentional career change — you know, the kind whereby a layoff is the trigger that prompts a person to pursue a different line of work.  The kind that sometimes feels less like jumping ship, and more like getting pushed overboard.

While that focus has uncovered a lot of valuable information that might not otherwise have surfaced, I was delighted to read recently that intentional career change — the kind that is the result of careful planning, execution, and a deliberate choice to move on — has started to make a comeback.  Check out the article Quittin’ time: More employees jump ship as economy improves.

Photo by Fabienne D.

Already a major challenge for career changers — especially the self-employed and other small business owners — health care just became even more of a wildcard with the recent passage of the new reform bill.  The news is not all bad, just new, and that means it may take a bit of extra effort to understand what it all means.   In her article The Good and Bad in Health Care Reform for Small Businesses, USA Today’s Rhonda Abrams breaks it down for us.

A look at jobs data from The Great Recession suggests — and client experiences corroborate — that there’s a new normal out there, and it reads like some sort of Bizarro Candid Camera episode. i.e. Don’t be surprised if sometime, somewhere, someplace when you least expect it, someone steps up to you and says, “Sorry, your job has gone the way of the dinosaur,” prompting an unplanned, possibly extended career transition with the potential to undo a lifetime of hard-won financial security.

Not pretty. But accepting this shift in the employment landscape is the first important step in making the career and financial choices that better prepare you for this “just in case” scenario. Check out this NY Times article to find out why that’s been even more true for baby boomers: Longer Unemployment for those 45 and Older.  (Anybody remember when experience was a plus for job seekers?)

Fortunately, some of those who’ve been on the job search front lines during this recession are sharing what they’ve learned about how to survive — maybe even thrive — in this Bizarro World. Click here to listen to an excellent New Hampshire Public Radio segment featuring none other than Tammy Hildreth, guest blogger, co-founder of Network for Work (TM) professional networking group, and winner of our recent giveaway of The Money Book for Freelancers, Part-Timers, and the Self-Employed.

Image by Ltshears

There have been several modifications to the COBRA premium subsidy program since it was enacted as part of the stimulus package about a year ago, so a person could certainly be forgiven for not being 100% clear about his or her eligibility.  Yet there are so many dollars at stake, it’s critically important for those who might qualify to have their facts straight.  No doubt in response to a barrage of questions, the Department of Labor has recently put together this new FAQ to clarify all the ifs, ands, and buts. 

Many thanks to my Garrett Planning Network colleague Deidra Fulton of Plano, TX-based Fulton Financial Planning, Inc., for calling this to my attention!

First, readers of the blog have probably heard me say it before: I believe that people need to adopt entirely different money management strategies in order to be successful when they make the leap from full-time employee to self-employed.  (See related posts.) But to my knowledge, the Freelance Finance system explained in The Money Book is the first complete personal finance system for “people with not-so-regular jobs”. So I’m thrilled to have a one-stop-shop resource I can recommend to my self-employed clients.

I’m also pleased to have played a small part in the project coming to fruition, and to be quoted in the book (see page 196!) When Joe contacted me about a year ago during the research phase of the book, I was more than willing to share what I’d learned, both as a self-employed and a financial planner, if — I must confess — a tad mystified by the monkey metaphor. (Read the book! Or check out the March 2010 edition of The New Means News, coming soon.)

Finally, it’s especially gratifying to have been involved in a project that made Liz Pulliam Weston’s list of 5 Money Books That are Worth Every Penny in her recent MSN article. I’ve been following — and continually impressed by — Liz since she spoke on credit reporting at the NH Jump$tart MoneySmarts Teacher conference a few years back. Congratulations to Joseph D’Agnese and Denise Kiernan on having earned such high praise for their work shedding light on this topic, which grows increasingly important as the ranks of independent workers expand.

My absolute favorite point and, IMHO, the key to getting back on track: “Your newly frugal—or at least simplified—lifestyle is the most valuable asset you accumulated during those long months out of work. And you earned it the hard way, too. Don’t throw it away lightly.” Check out the rest of the article!

OK, but no rest for the weary…  Now it’s time to get serious and take advantage of your newfound security to be better prepared in case it happens again.  And with what appears to be a permanent shift away from the unspoken employer/employee contract of old, your safest bet is to assume that it — a period of un- or underemployment — can happen again at any time, and plan accordingly.  Here’s what I’d recommend:

1. Reevaluate cash flow and income taxes, i.e. understand what your true new take-home is, so that you can make good choices about spending levels and how to allocate the new income. (The newly reemployed may feel like recent college grads or ex-cons, just freed up from a long period of austerity measures and eager for a little retail therapy, and wishful-think themselves into overspending. Certainly, a little splurge is probably in order, but be careful not to further derail things.)

2. Now that you’re employed and probably eligible again, look at refinancing your mortgage (rates are still low) – maybe consolidating some other debt — & at least secure a Home Equity Line of Credit (again, to open up your options should unemployment happen again.)

3. Check your credit report. If it’s not where it should be so that you qualify for the best rates on loans, begin taking steps to fix that.  (Liz Pulliam Weston is the expert on how to do that.)

4. Be sure to evaluate employee benefits at the new job: 401k match? Health insurance better than spouse’s? Cafeteria plan? Employer Stock Purchase Plan? Life insurance benefit worth taking advantage of? Any other “free money”??

5. Even if you are earning so much that you’re sure to be ineligible for college financial aid for any kids going to school, fill out the college financial aid form (FAFSA). Otherwise, you’re out of luck for a financial aid reevaluation if your situation changes for the worse.

6. Once you have a grasp of cash flow, you’ll be in a position to decide how much to devote to a) paying down debt,  b) rebuilding emergency reserves,  c) restarting saving toward goals such as retirement. In general, don’t max out your 401k if either a) or b) is a trouble area. But do at least get any 401k match. Don’t prepay a mortgage with a lower interest rate if you’ve got credit card debt at 27% or an inadequate emergency fund (< 6 months living expenses).

7. Once you understand your income tax situation, you can decide how to set your withholding to avoid ending up with a big bill (& maybe penalties) or refund next April. If your new cash flow permits, you may want to play some catch-up for retirement by making a 2009 IRA (Roth or traditional) contribution before April, or having a self-employed spouse direct more to his/her SEP or Solo 401k. BUT not until you have a foundation (emergency fund, “bad” debt paid off, cash flow under control) firmly in place!