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The following post is by MPFJ staff writer, Kelly Gurnett. Kelly runs the blog, Cordelia Calls It Quits, where she documents her attempts to rid her life of the things that don’t matter and focus more on the things that do. You can also follow her on Twitter and Facebook.
Whether you’re thinking of starting your own business or asking your current boss if you can telecommute, there are plenty of things to weigh when considering working from home, such as how well you can work without direct supervision and whether you have the discipline to keep yourself motivated with all your newfound freedom.
But there are also the financial considerations. If you’re seriously considering making the switch to working from home, you’ve (hopefully) already thought about the big things like salary differences and how you’ll get health insurance. (If not, stop right here and do those things, immediately.)
But, as someone who juggles a part-time office job and a part-time freelance business, I can tell you that there’s more to the financial balance sheet than that.
Here’s a quick list of the ways you may not have considered that working from home can both save you and cost you in the budget department:
Savings
Commuting costs. If you take public transit to get to and from work, that’s one level of savings. But if you drive? You’ll save in lots of areas: gas, tolls, parking, even the repairs that come as a result of the added wear and tear being put on your car. And if you can get rid of a second car altogether by working from home, you’re also saving on car payments and insurance and registration fees. It can add up quickly!
Food and drinks. How many times do you grab a coffee on the way in to work or go out for lunch because you haven’t had time to make anything at home? How often have you felt pressured to eat out to escape a stressful office or an annoying coworker? And (admit it!) how many times have you guiltily raided the vending machines for a pick-me-up?
When you work from home, you can be more careful about your food spending. You have time to reheat leftovers, make salads and sandwiches from scratch, and keep a pot of Joe warm for whenever you need a lift.
Wardrobe and toiletries. While it’s not recommended that you stay in the same pair of sweats for several days straight, working from home does give you a little more leeway in how you can dress. You’ll still want to have a good outfit or two in the event that you need to do a video conference call or have a face-to-face client meeting—but for the most part, you can wear whatever you want while you’re writing your monthly report, and no one will be any the wiser. So keep a few timeless staples like a suit and a nice button-down shirt with slacks, and you no longer need to worry about continually updating your wardrobe to keep up with the trends. (You’ll also save on dry cleaning costs.)
And ladies? No need to straighten/curl/style your hair and do the full makeup routine every morning, which means you’re spending less on beauty products, too. (It’s up to you if you want to put on a little mascara and lip gloss in case the UPS guy comes to the door, but it’s still minimal compared to your usual routine.)
Child care. If your kids are of the age where they don’t need constant supervision (or you’re a master at getting work done during nap times), you have the potential to save quite a bit on child care costs. If you still need some alone time to concentrate on your work, you might be able to reduce the number of days you pay for child care, only having the kids home some of the time. Even a day or two a week can equal big savings.
Costs
Utilities. Now that you’re home all day, no more setting the thermostat program to kick down 10 degrees when you’re at work. (Unless you enjoy working in fingerless gloves and a hat, which is certainly your prerogative.) You’ll also be using more electricity, water, you name it.
The good news is that if you have a dedicated home office—a room (or even just a desk) used for work and only for work—you can claim a percentage of your utility expenses when you file taxes. (You’d calculate the percent of your home’s square footage made up by your office, then calculate that percent of your year’s utility bills.) Still, on a month-to-month basis, be ready for an up tick in this area of your budget.
Equipment costs. If you’ve already got all the tech gear you need to work from home, you’re golden. However, chances are you’re going to need something extra once you start working from home full-time. You may need to upgrade your PC, buy a multifunction printer, or invest in a mic and web cam for video conferencing.
Again, these upgrades can be claimed as deductions as long as the equipment is used used for business—or, if you’re a remote worker for a company, your company may offer you reimbursement options. But you’re still potentially shelling quite a bit out pocket initially.
Taxes. Speaking of taxes, if you’re working from home as a freelancer, business owner, consultant, or any other work that qualifies as self-employment, get ready for your relationship with Uncle Sam to change drastically.
For me personally, as I’ve transitioned from full-time to part-time at my office job, I’ve had to make an extra $1.33 freelancing for every dollar I’ve lost as a corporate employee. This is because the IRS hits me twice on my freelance income, taxing me both as an employer (self employment tax) and an employee (income tax / estimated taxes throughout the year). So every dollar I make freelancing? One-third of it has to be put aside for tax payments. Things can get tricky when you’re first navigating the waters of self-employment, so I’d highly recommend finding a good CPA to walk you through the basics.
How about you all? Do you work from home? What other savings/costs have you noticed that a regular employee wouldn’t experience?
Share your experiences by commenting below!
***Photo courtesy of http://farm4.staticflickr.com/3466/3289898604_8301851433.jpg
