Do you cringe whenever you have to waste paper at work, consider Facebook and WhatsApp deadly distractions rather than good ways to while away the work day, and have no IT guy to run to when your computer screws up? Then you’re probably a self-employed person or a small business owner.
Not having to report to a boss or rush to work with the rest of Singapore in the morning is great.
But you have to make sacrifices in other areas, such as by having a fluctuating income, not having paid medical leave and employer-sponsored health insurance, and missing out on those CPF employer contributions.
That’s why you should grit your teeth and fork out the cash for these three things. You’ll thank yourself later.
1. Private health insurance
Being self-employed can be awesome when you’re in good health and can enjoy being able to go the cinema at 11am. But when you fall ill, it sucks.
You don’t receive paid medical leave, which means you either work while sick or lose money. And in the event of a more serious illness, you’ll have zero company-sponsored health insurance to fall back on.
That means you’ll have to rely on the bare-bones Medishield Life, and pay out of your own pocket for anything that’s not covered. If you’re hospitalised, you can forget about visiting a private hospital
That’s why private health insurance is so important to have when you’re self-employed.
To give you an example, MediShield Life coverage is pegged to the cost of choosing Class B2 or C wards in public hospitals. Depending on which private Integrated Shield Plan you choose, you’ll may be entitled to higher coverage, enough to stay in private hospitals or class A or B1 wards in public hospitals.
Other than added comfort, one big reason why Singaporeans decide to go to private hospitals is because the waiting times are much shorter.
What’s more, if you’re seriously ill, you want to have to the freedom to stick with your preferred doctor, rather than just be assigned the next available specialist from the hospitals’ pool. Patients in Class B2 or C wards don’t have the liberty of choice.
The most economical way of getting private health insurance is to sign up for an Integrated Shield Plan. Part or all of your premiums can be paid for using Medisave.
You can compare plans for free using MoneySmart’s health insurance wizard.
2. Savings accounts to stash your Medisave, CPF and retirement funds
And unlike salaried employees, who get their contributions deducted from their salaries every month, self-employed people only have to make their Medisave contributions at the end of the year in a lump sum.
So if you end up spending all your money and living from hand-to-mouth, you’re going to have trouble coughing up your Medisave contributions. If you make your Medisave contributions late, you’ll have to also pay interest.
What’s more, without compulsory contributions to your CPF OA and SA, that also means that you’re responsible for your own retirement planning. If you fail to plan and don’t save up anything, that means you could literally be penniless when you’re old.
That’s why it’s so important to keep your Medisave contributions, voluntary CPF contributions (if any) and retirement funds separate from the money in your main account.
Keeping your funds separate will enable you to put aside a bit every month towards these three things, rather than panic when you take stock at the end of the year.
For long-term retirement savings, it is a good idea to open a high-interest savings account. Here are some of the best savings accounts in 2018.
3. Data backup or cloud storage
There are few self-employed people that don’t require the use of a computer these days, with perhaps the exception of Grab drivers. Even private tutors might need to prepare materials for their students electronically.
Unlike office computers, which are usually connected to a central network maintained by an IT professional, your data is not automatically backed up.
And for people whose work depends heavily on computer use, a hard disk failure can be catastrophic.
So make sure you are regularly backing up your data. You can do this by investing in a good external hard drive and physically backing up your data in one of those. But be aware that external hard drives can and do fail. If your data is a question of life and death, you might want to back it up on more than one device.
Another option is to purchase cloud storage space so your data can be stored online. Some cloud storage services include Google Drive, Apple iCloud Drive and Microsoft OneDrive. Again, there are some drawbacks, the biggest being that your data can be hacked. So if you’ve got any top secret data that would cause the end of the world if revealed, store it physically.
As a self-employed person, do you have any of the above? Share your recommendations in the comments!