By Carmen Reinicke -
CNBC + Acorns
Amid the pandemic and the phenomenon dubbed the "Great Renunciation," millions of Americans are leaving their jobs to become their own bosses.
In October, there were about 9.44 million unincorporated freelancers in the country, according to data from the US Bureau of Labor Statistics.
Since April 2020,
the number of self-employed has increased by almost 2 million
.
This year, through October, Americans have applied to more than 4.5 million federal taxpayer identification numbers needed to register new businesses, according to data from the Census Bureau.
That has already surpassed the 4.3 million new business applications for the full year 2020, as well as the 3.5 million submitted in 2019.
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Leaving a steady job to become a
freelancer
or start your business is not a decision that should be made without proper planning.
Here's what experts recommend before, during, and after transitioning from a 9-to-5 job to life as an entrepreneur.
"If you're thinking of taking the plunge, I always encourage people to do it the right way," says Sheneya Wilson, an accountant and founder of
Fola Financial
in New York.
Before resigning
Before venturing out on your own, it's a good idea to establish a business plan for yourself and your new company, according to Kevin Lao, certified financial planner and founder of
Imagine Financial Security
in St. Augustine, Florida.
That means writing in plain language
what the goal of your project is, who your audience is, and how much you expect to charge
, he explained.
"It's very difficult to be successful if you don't have a very compelling 'why'," Lao said.
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It's also important to identify potential sources of income, said Mandi Woodruff-Santos, personal finance expert, executive producer and host of the
Brown Ambition
podcast
.
From there, you should also be open to accepting new jobs or payments as you see fit, he said.
Once you have a vision of your next steps as an entrepreneur, you need to make sure you have the funds you need to stay afloat while you build your project.
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The exact amount will depend on the level of risk you want to expose yourself to and how quickly you think you can make a profit, Lao recommended, who said that when starting his financial firm he
had saved 12 months of personal expenses and three months of costs business
Company expenses include payment to establish the entity, if necessary, as a corporation and payment for equipment and services, such as accounting software or the purchase of a new computer.
A mistake is to create a different job from 9 to 5 that becomes too monotonous "
Mandi Woodruff-Santos, Finance Expert
You may also need to purchase health insurance and set up a retirement savings plan, among other benefits that you would generally get through an employer.
Something that can be helpful is setting an income goal to help you pace yourself each month and make sure you cover your expenses.
If you're not ready to make the leap, there are other options like
viewing your business as a side job
in hopes of turning it into a full-time source of income later on.
When it just started
There are more things to consider once you have taken the step of going solo.
The first is to organize finances and
be clear about what is a personal expense and what is a business expense
.
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"You have to start separating your own funds from those of the company," says Wilson, who believes that the easiest way to do this is to have a different bank account and credit or debit card for company expenses.
Staying organized will help adequately anticipate taxes, including deductions, he added.
This is because small business owners typically have one of the highest taxes.
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"Knowing that, before the end of the year, you must plan how to minimize tax obligations," he said.
This includes knowing what can be considered a business expense, as well as what other credits and deductions can be accessed.
"You have to start separating your own funds from those of the company"
For example, those who have been self-employed or started a business this year can benefit from a work-at-home deduction, an important tax exemption only available to people who run their own businesses from home.
To ensure that you are organizing everything correctly, it is a good idea to have experts that you can consult.
Wilson recommends hiring an accountant or tax preparation specialist who can assist you in filing your reports.
He also suggests having a good lawyer depending on the type of business you are going to start.
One of the first steps to undertake is to be clear about what is a personal expense and what is a business expense, experts recommend.Linka A Odom / Getty Images
Additionally, it helps to enlist the advice of a financial planner to help you with budgeting and monetary goals as you transition to
freelance
life
, says Woodruff-Santos.
Benefits of life as a
freelancer
Once you've made the decision to become a
freelancer
or an entrepreneur, don't forget to approach it like any other career move.
"I advertised it like people do when they get engaged or have a baby,"
says Woodruff-Santos, adding that it can help you land potential clients in your current network.
He also recommends keeping in touch with a community of small businessmen or entrepreneurs with similar projects, to have a group to lean on.
This is based on the fact that those who start a business do not have the possibility to take advantage of the
happy hours
in the office or other social aspects incorporated into working in a larger company and it can be lonely.
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She also recommends setting and adhering to limits, for example
deciding how much time to spend working and when to be off duty
.
"A mistake is to create a different job from 9 to 5 that becomes too monotonous," he concludes.
This article is part of the
Invest in You Ready series.
Set.
Grow
(Invest in you: Ready. Done. Grow), an initiative of CNBC and Acorns, the microinvestment app.
NBC Universal and Comcast Ventures are
Acorns investors