Categories: Careers

Creating A Benefits Package When Self-Employed Is Easy (And So Important)

You get to set your own hours, you can wear your pajamas to the “office” and you can take impromptu vacations: it’s hard to deny the benefits of being self-employed. One catch? A lack of benefits package, which can be easy to take for granted when you have a full-time job. That’s where your employer sets up everything, including your health insurance, paid vacation, sick leave and 401 (k) matches. Creating your own benefits package when self-employed is critical — and, luckily, easy to do.

Health Insurance

We shouldn’t need to tell you how valuable health insurance is. No matter how healthy you are, accidents happen and preventative care is critical to ensuring long-term well-being (and lower medical costs down the road.) If that’s not enough initiative, remember that you incur a tax penalty if you’re uninsured for more than two consecutive months. Where can you find good health insurance? If your income is low, see if you qualify for Medicaid. You can also check with local health insurance agents and bankers, the federal insurance marketplace ( or health insurance carriers like USAA. If you don’t foresee needing a lot of medical care each year, opt for a plan with a high-deductible.

Disability And Life Insurance

While grim to consider, neither of these should be neglected. Disability insurance helps cover your bills — including rent and food — if you’re ever unable to work for an elongated period of time. A life insurance policy should be taken out when you have someone who is dependent on you financially, whether that be an aging parent, a partner or a child. It’s recommended to choose a policy that’s ten times your annual salary, but, don’t freak out, because those are usually pretty affordable if you’re in good health. Consult with various insurance companies about different policies in order to find ones that benefit you the most.

401(k) Matches

Since you don’t have an employer to contribute to your retirement fund, consider opening a Roth IRA, which lets you deposit money into a retirement account — with no taxes! Roth IRAs are especially useful for those new to the workforce and who are expecting their tax bracket to be higher in retirement than it is now, since contributions are tax-free. Earnings on your investments can turn into hefty nest eggs come retirement, and you can even withdraw money you’ve put in. If you want access to the earnings on that money, you’ll have to wait until five years after you first invested and must be at least 59.5 years of age, however.

What about traditional IRAs? The key difference between a Roth IRA and a traditional IRA is that traditional IRAs give you a tax-deduction upfront, delaying taxes until you withdraw the funds when retired.

Paid Vacation

While it’s hard to recreate a company having to pay you to lie on a beach or wander through Europe, you can still integrate unofficial paid vacation into your benefits package while self-employed. A good way to do this is to set up a “paid vacation” account and have part of your paycheck automatically deposited there every month. This will help offset the costs of travel, along with the costs of not working while you’re away.

Sick Leave

Along with setting up a “paid vacation” account, you could also set some of your earnings aside in the event that you get sick. While it might be tempting to work through illness — after all, your income stagnates when you’re stuck in bed — don’t neglect self-care. Take time off when you’re sick. Let yourself rest. Take a mental health day to recharge. Taking care of yourself will have better long-term impacts, both for your body, mind and your career.

Lead image via Getty

Kim Bussing

Kim Bussing is a writer and editor who covers lifestyle, finance, entertainment, technology, and business for Knew Money. She is passionate about discovering new trends and helping demystify the nuances of finance.

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Kim Bussing

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