Does Working From Home Really Save You Money? 2

Financial Pros and Cons of Working at HomeFor those of us with an entrepreneurial spirit, the benefits of working from home (autonomy, flexibility, comfort) often outweigh the costs (distractions, interruptions, isolation). But the pros and cons can also be monetary, and it’s easy to overlook that when you’re enjoying visions of working in your PJs in the middle of the afternoon.

When you think about it, there are plenty of things that you have to pay for when you report to an office everyday, and working from home strikes these items from your budget. On the other hand, working from home also adds a few lines to the budget that might not have been there previously.

So, if you’re contemplating making the switch to a home office, here are the financial pros and cons you should keep in mind:

Pros

No More Commuting Costs

Yes, this includes money spent getting to and from work, such as gas if you’re a driver or public transit if you take the bus or subway. But if you take your car to work, it also includes all the ancillary costs that go along with it—tolls, parking, extra repairs due to the added wear and tear on your vehicle.

Heck, depending on your living situation, you may even be able to ditch your car altogether. My husband and I were a two-car household until I started working for myself, at which point we realized we no longer needed the extra car. By selling mine, we got a nice cash infusion that I used to pay down some debt and pay off the rest of my husband’s car payments. Plus that’s half the oil changes, annual inspections, and other costs for us.

No More (or At Least a Lot Less) Eating Out

It’s so easy to justify eating out when you’re stuck in 9-5 cube land. You’re stressed and trying to adhere to someone else’s schedule, and it’s often easier just to grab a coffee on the way in or lunch at a fast-food drive-thru than make your own. Plus, if you hate the 9-5 and the job you hold in it, chances are you’re more likely to justify “treating” yourself with an extra cocktail at happy hour or a pricey dinner out on the weekend.

When you work from home, it’s a lot easier to find the time and motivation to make healthy, budget-friendly meals—which both your body and your wallet will thank you for.

Childcare Savings

While it’s not necessarily easy to work from home while also supervising your children, it can be done, and plenty of freelancers and entrepreneurs have made it work for them. Childcare can be prohibitively expensive, and if you can work out a routine that lets you spend more time with your kids and get your work done while they’re napping or otherwise occupied, you could save a ton (and also get more quality time with your family).

No more peer pressure purchases

When you work in an office, there are plenty of ways you can be peer pressured into spending money. Your coworkers’ kid is having a fundraiser for their soccer team. Everyone’s chipping in $5 to buy pizza and cake for someone’s birthday. The others are going in on a Boss’s Day gift for your boss, and even though you hate him, you don’t want to look like the one heel who refused to join in.

When you are your own boss and your only coworkers are pets and loved ones… Well, you still might be guilted into buying pizza or chipping in for birthday presents, but that would have happened regardless.

Cons 

Healthcare

If you’re covered under a spouse’s insurance, this point won’t apply to you. But for many entrepreneurs, cutting ties with a traditional job also means losing their healthcare coverage and having to pick up the costs themselves. While many of us are still waiting to see how Obamacare plays out in terms of our average out-of-pocket costs, the fact remains that whatever your costs are, they will be out of pocket. And if you’re used to having a employer cover your insurance, this can be a big adjustment.

The good news, however, is that if you’re self-employed, you could qualify for a tax deduction if you carry your own insurance. (See these FAQs and consult a CPA for your own particular situation.)

Taxes

If you’re a self-employed sole proprietor or small business owner, chances are you’ll be paying considerably more in taxes than you ever did as a salaried or hourly employee. This is because you’re now going to be hit both as an employee and an employer.

It’s best to consult with a CPA to get the numbers on how much you’ll owe in your particular situation. But to give you an idea, I learned that when I started working for myself, I had to prepare to put aside a full 1/3 of every dollar I brought in for tax payments. This means that in order to quit my day job and maintain our household budget, I now have to make more per hour than I did at my old 9-5—or radically slash some budget items.

Misc. Business Expenses

Working from home usually requires some extra expenditures, whether it’s upgrading your computer so you can work more effectively, paying for a higher internet speed, or investing in additional equipment like a fax machine, scanner, or webcam. Depending on your line of work, you could also require special software, supplies, shipping charges, and other items.

Be sure, when determining a work-from-home budget, to factor in these costs. You’ll likely be able to write off a number of them come tax season, since they’re business-related, but you’ll still have to pay for them now.

Do you work from home? What other pros and cons have you found?

  • diditogk

    I live in Europe so things are different in terms of health insurance and taxes. According to me the biggest Con is the fact that you stop meeting a lot of people and become sometimes less creative. Saving time (not only money) from commuting, lunches and household chores – this is a great pro.

    In addition, I like using my own time as I like – working from home as a freelancer means most of all freedom (and a lot of insecurity). But it is worth it.

    • bplans

      Great point about isolating yourself and potentially depressing your creativity by working at home—it’s easy to forget about those lost opportunities when you give up a traditional work environment.

About the Author Kelly Gurnett is the Managing Editor of Career Attraction, Editor-in-Chief of CareerMeh, Assistant Editor of Brazen Life, and 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. Read more »

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