Nobody Told Me This, Part 2: Building Wealth Without A Safety Net

Nobody prepares you for the moment you realize there’s no HR and 401K opt-in that someone will match with FREE money when you become self employed. And one of the things nobody tells you about all of it, is that this all falls on you. Let’s dive into Part 2 of Nobody Told Me This, my behind-the-scenes look series on being self-employed.

Before I quit my day job to do my blogging side hustle full-time, I was working hard to save up an emergency fund. I was working at a bar on the weekends, which really helped me do this quickly. Lucky for me, I really enjoyed working there and had been there since college. I spent the weekends working, but it was fun. It was honestly ideal to work at a popular lounge every weekend, instead of spending money out at bars.

Then, when I decided to quit my Alternative Apparel corporate job to try the blog full time, I did two things. I set myself a timeline for what success looked like to me (which was basically just being able to afford to live similarly to having the corporate job within 6 months), and I increased my shifts at the bar to continue building that emergency fund.

6 months flew by, and my income pretty much replaced and exceeded my corporate job salary. And the bar shifts were still fun and making me easy money, so I kept at it beyond the predetermined timeline.

Many people feel pressured to dive 100% into their side hustle immediately, but I am a firm believer in the value of maintaining a secondary source of income. Whether that’s a “side hustle to your side hustle” or a traditional day job, you should be maxing out your time and energy before you make any major life changes. You also shouldn’t rush to hire help or prioritize free time until your business is truly stable and you can financially afford to do so.

While yes, quitting my day job gave me more time to focus on the blog and grow it, I was at a point where it was time to make that decision. When you find yourself having to say no to opportunities because of your day job, then it’s time to consider reducing the work of one, to lean into the other. And yes, sometimes that means taking a crummy part-time job to supplement the temporary income drop.

My Financial Literacy

As a former accountant and the daughter of a CPA, balancing a checkbook at 11 years old at the kitchen table was what we did in our family. Exciting times, right? I’m grateful for the financial literacy my parents ingrained in me at a young age. But there’s no reason why we all shouldn’t have this knowledge. It’s FREE information. If all of this just made you panic a little, I highly recommend Vivian Tu’s book to make this feel like something you can (and should be) capable of.

Here’s what I do with my finances as someone who was a former accountant and has a CPA father who sat me down to dive into finances for as long as I can remember.

Have a High-Yield Savings Account

A high-yield savings account (HYSA) is going to give you a higher return on your cash on hand than your Wells Fargo account ever will. Right now, Wealthfront has 3.3%. This changes with the interest rates and economy, but I have always found them to have the highest rate. You can even create buckets. Mine are organized as follows:

Cash On Hand - This is what I use to move money into my checking account to pay for my monthly expenses. I keep minimal cash in my checking; I want my money working as much as possible for me.

Quarterly Taxes - At the end of each month, I calculate 20% of my net profit (total revenue earned, minus total expenses for the month). Then I move that money into this bucket. When quarterly taxes come around, I pull directly from this, which always feels less painful.

Emergency Fund - I’ve set aside 6-9 months of living expenses for a rainy day. This amount should be the bare minimum to live on. Not going out to restaurants, and shopping, kind of living. Just living. Rent, groceries, and monthly essentials—that’s it. And build this first before doing anything else.

Retirement Options For Self-Employed People

The thing no one tells you about when you quit your day job where they match your 401K, is that you now have the full burden of planning for your retirement. No one is matching shit for you. No one is giving you equity in a company you’ve worked for for 10 years. It’s just on you, babe. And that’s okay. It’s doable, and here’s what to know.

Retirement is important to start young, because time is your best friend when dealing with money that’s compounding. You can start young, with less money,and end up with more, versus waiting to start when your income is larger, but you’re older. Start young, with just a little each month and you’ll be set up for success.

A great perk of contributing to your retirement is that it helps to reduce your tax liability (which is true for anyone, self-employed or not). So this is a nice way to offset your taxes a bit while growing your retirement if it’s something you can afford to do.

Roth IRA - Depending on your income, you can contribute to a Roth IRA, which gets taxed when you deposit it; this way, when you take it out, it’s already been taxed. Consult your accountant if your income permits you to contribute to this, as there are income limits.

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Solo 401K or a SEP IRA - I initially had a SEP IRA for a few years, but there are some contribution limitations. I’m set up as an S-Corp, meaning I have a “reasonable” income as my W-2, and it’s significantly lower than what I actually earn. I was limited to this reasonable income amount to contribute off of, but I wanted to contribute more. So I switched to a Solo 401K, which allows me to contribute as the employee and also as the employer (hi, I am both, so yes, it’s just me making those contributions). This has helped me catch up where I lost out on some years.

Investments Beyond Retirement

Now that we’ve got retirement and our emergency fund figured out, it’s time to invest beyond both. I use Wealthfront for this as well (and Vivian Tu, the financial expert, does too), to handle my investments. It’s a robovisor that makes trades based on my risk level. I would not recommend day trading, ever. Leave it to the robovisor to handle the investing.

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What I Do Every Month

I spend a little time each month reviewing all of my financials as a business owner. I set it on my calendar to work on and it keeps everything top of mind. Each month, I draft out that 20% net profit for taxes, I make any contributions to retirement or my investments based on my annual goals and how my month was looking, and take a quick look at my QuickBooks transactions.

This monthly system keeps everything in order and gives me a good picture of my goals and financial standing as a self-employed person. I encourage anyone to set a reminder each month to do a little check-in. It can make things feel less daunting, and will set you up for success come quarterly tax time.

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That’s a look at how I’m handling the financial aspects of life, from retirement to savings, as someone who has been self-employed for over a decade. If all of this felt like jibberish to you, I can’t recommend enough reading Vivian’s book to gain financial literacy.

Plus, don’t forget about looking into Wealthfront for your portfolio and HYSA. When you use my referral link, you can earn 4.05% for 3 months, learn more here →

Here’s the thing though, building wealth without a safety net is hard. No one is saying it’s easy, but it is necessary and it’s completely doable. It requires discipline and hustle and yes, sometimes a shitty part-time job that lets you stack your money while working on your dream. It also helps to give you some peace of mind once you get into a flow.

Next up in this series is the stuff that HR used to handle, which now falls on, you guess it, me. You can also check out Part 1 here on how creators make money.

Got a question? Drop it below!