3 Overlooked Things To Consider Before Quitting Your Day Job

Moving from a boring, unfulfilling day job to working for yourself is a satisfying experience. There's a lot more to consider than money when you're thinking of making the switch, although being in a good spot financially is a must.

I'm in my fourth month of working for myself, and I have a better perspective now on parts of self-employment I hadn't thought through. Here are three that crossed my mind before I quit but that I didn't take seriously enough.

1. Work Ahead, Because There Are No Sick Days

Last week was a whirlwind. We got hit with a major snow and ice storm, and there was no way I could take my girls to the babysitter for a few hours like I usually do. My only uninterrupted work time was while they slept. On top of working with a three-year-old and a five-year-old beside me, my brother's wife went into labor, so my six-year-old nephew came to stay with us from Tuesday through Thursday.

The kids were well behaved most of the time, but working was still hard. Then on Saturday I started feeling rough, really rough. Saturday, Sunday and Monday were spent in bed. On Tuesday I felt more like myself, took the girls to the babysitter for a few hours and started catching up.

I try to do most of my work ahead of time, and now I'm so glad I do. Those three days would have sunk me if I'd waited until the last minute. When you're self-employed and get sick, you may not be able to take a break, especially with several clients. Some clients will understand, and others expect your work on time, every time. That's a big change from side hustling, when you still have a day job behind you.

Save This Article

Email this article to yourself

We'll send you a link to "3 Overlooked Things To Consider Before Quitting Your Day Job" so you can read it later, plus The Weekly Ritual, our free newsletter. Unsubscribe anytime.

Email address

Email It To Me

Email me this article and sign me up for The Weekly Ritual. See our privacy policy.

2. You Have To Stick To Your Guns On Rates

Before I quit, I'd take almost any freelance job that fit my skills. I wanted experience, and I wanted my monthly income as high as possible. I'd stay up all hours of the night writing articles for a client who paid well below my asking rate.

That client sent me a lot of work, so accepting a much lower price seemed like a good idea. I was wrong. He tore apart many of the articles I wrote for him, and it shocked me.

What I've found is that every time I negotiate my rates down, I end up with a client who wants more and more for less and less. You'll probably have to learn this for yourself. My advice is to figure out who your really good clients are and drop the rest. I have fewer clients now than before, but my income is slowly growing and I'm under less stress.

3. Don't Compare Your Success To Someone Else's

I'm still early in my self-employment journey, although I've been growing my business for more than a year. What started as a hobby is now my main source of income. I'm not getting rich, but my income is slowly growing. Next to some people's, it looks like pocket change, and that's all relative.

I live in a low-cost area, and I've consistently earned as much or more than I made at my job as an insurance agent. That's huge for me.

Comparing your progress to someone else's isn't apples to apples. Your business model, experience, cost of living and time in the game are all different. When you read other people's income reports, use them as proof that the income you want is possible, and as motivation, nothing more. Rate your success by your own progress.

My Final Thoughts

Working from home is great. Self-employment has its downsides, but for me, working a job I don't like had far more. I also want to say there's nothing wrong with a day job. Lots of people love theirs.

Working for yourself can be stressful, and it's also rewarding. If you're thinking of making the switch, set a date and start preparing. You'll learn what to adjust as you go.

Update From The Cult Of Money Editors

Alexa built a $10,000 emergency fund before she quit, and her story of how she saved it on a low income is the place to start. Here's the rest of the money checklist with current US figures.

The Pre-Quit Money Checklist

Source: IRS, SSA, Department of Labor. Cult of Money.

Self-Employment Tax In Numbers

Self-employed people pay both halves of Social Security and Medicare. On $50,000 of net profit, self-employment tax is about $7,065 ($50,000 × 92.35% × 15.3%), according to the IRS self-employment tax rules. You can deduct half of it when figuring income tax. Setting aside 25% to 30% of every payment covers self-employment tax and federal income tax for most freelancers at that income, before state tax.

If you skip estimated payments, the IRS charges an underpayment penalty. You avoid it by paying at least 100% of last year's total tax through the year (110% if your AGI was over $150,000), or 90% of this year's.

Health Insurance After You Leave

Health coverage is the cost that surprises most people. COBRA lets you keep your employer plan for up to 18 months, but you can be charged up to 102% of the full premium, according to the Department of Labor. Leaving a job lets you buy a marketplace plan outside open enrollment through a special enrollment period, within 60 days of losing coverage.

Marketplace costs went up for many buyers in 2026. The enhanced premium tax credits that capped premiums for higher earners expired after 2025, and HealthCare.gov again lists eligibility for the premium tax credit as income between 100% and 400% of the federal poverty level. People earning above that no longer get help. Price a plan at HealthCare.gov before you give notice. If you're self-employed, you can deduct the premiums you pay for yourself and your family.

If Clients Pay You In Crypto

Getting paid in crypto doesn't change the tax: it's self-employment income, valued in US dollars on the day you receive it, according to IRS guidance on digital assets. A client who pays you $2,000 in USDC owes you a Form 1099-NEC the same as one paying by bank transfer, now that the reporting threshold for 2026 payments is $2,000.

The dollar value on the day you're paid becomes your cost basis. If you later sell Bitcoin you were paid in after it rose, the increase is a capital gain on top of the income you already reported. Record the date, amount and dollar value of every payment. Our pages on crypto bookkeeping and crypto tax rates explain how to keep those records.

Freelancers Outside The US

• United Kingdom: Register for Self Assessment by October 5 after the end of your first tax year as a sole trader. You pay income tax plus Class 4 National Insurance on profits, at 6% between £12,570 and £50,270 and 2% above that in 2026/27, according to GOV.UK. Since April 6, 2026, Making Tax Digital has required quarterly digital updates from sole traders and landlords whose qualifying income was over £50,000, falling to £30,000 from April 2027, according to HMRC.
• Canada: Self-employed people pay both the employee and employer shares of Canada Pension Plan contributions. Returns are due June 15, but any balance owing is due April 30.
• Australia: Sole traders use their individual tax file number, and need an ABN. Registering for GST is required once turnover reaches A$75,000.

What To Watch Out For

• Quitting before the income is steady. Alexa quit after her side business had grown for about a year. A few months of side income that matches your salary is a sturdier signal than one big month.
• Underpaying estimated taxes. A large April bill plus penalties is the most common first-year surprise.
• Losing employer benefits. Price health insurance, disability coverage and retirement savings you'll now pay for yourself.
• Mixing business and personal money. A separate business checking account makes taxes and crypto record-keeping far easier.

FAQ

How Much Money Should I Save Before Quitting My Job To Freelance?

Six months of living expenses is a common target, plus enough to cover your first quarterly tax payment. If your field has slow seasons, plan for more.

Do I Have To Pay Quarterly Taxes When I'm Self-Employed?

Yes, if you expect to owe $1,000 or more in federal tax for the year. Payments are due April 15, June 15, September 15 and January 15.

What Is The Self-Employment Tax Rate?

It's 15.3% on 92.35% of net earnings, made up of 12.4% Social Security on earnings up to $184,500 and 2.9% Medicare on all earnings. An extra 0.9% Medicare tax applies above $200,000 for single filers.

Is Crypto I'm Paid For Freelance Work Taxable?

Yes. It's self-employment income at its dollar value on the day you receive it, and any later gain or loss when you sell is a capital gain or loss.

Can I Get Unemployment If I Quit My Job To Start A Business?

Generally no. State unemployment programs pay workers who lose a job through no fault of their own, and quitting to start a business doesn't qualify.