Most People Who Want to Work From Home Don't Know About the Hidden Costs That Come With It
People often think about how much money they'll save if they transition to work from home, but very rarely do they think about the added costs
Most people would welcome the opportunity to work from home for additional freedom and flexibility with schedules and saving money and hassle with the daily commute. Do you know that there are often many hidden costs to working from home? Most people don't know about these hidden costs, which come back to haunt them. So if you want to work from home, make sure you know what the true costs will be.
- High-Speed Internet and Other Utilities
- Office Supplies
- Health and Exercise
- Social Activities
- Professional Development
- Double Taxation
- Home Insurance
- Separation of Home and Work
Many people use their personal smartphones, laptops, and tablets for the occasional business purpose, such as checking email. When you work from home, though, these devices are the essential tools you need to work and communicate with your supervisors, coworkers, and clients. And don't presume that your employer will provide these items for you. One of the tradeoffs from working at home is the use of your own devices, which need to be in good working order. If you have devices that are slow or prone to crash, your productivity can be impacted.
If your technology is old or slow, you'll probably want to do some investigation or upgrades before you start working from home. If you don't have required technology for your job, you'll have to get it. So unless your employer is providing these items, you'll have to budget not only for these expenses upfront, but budget for their maintenance over time. Technology can be one of the biggest expenses for working from home. But you may be able to receive a tax deduction for their use, especially if you are a freelancer or independent contractor. You'll have to check with a tax professional, of course.
Don't forget that one of the simplest ways of keeping expenses down for devices you own is to avoid having to replace or repair them. Just like preventive maintenance is good for your car, don't avoid preventive maintenance for your technology. Keep security software up-to-date to keep viruses from slowing you down or locking you out. And it's probably a good idea to invest in a drink cup with a lid to prevent the inevitable spill.
Cranky devices are not the only causes of low productivity when working from home. Sometimes your connection to the office is just too slow for the type of work you need to do or there's too much of a demand on your Internet connection at home for you to stay connected. In either case, you'll end up needing to upgrade your Internet speeds, presuming that your technology isn't partly to blame.
You could end up facing a problem where you can't upgrade your Internet speeds. You might have already reached the upper limit of your speeds, especially if you live in the middle of nowhere. You could also be facing a situation where you transfer large amounts of date but have a data cap on your home Internet, which could end up costing you a lot each month when you go over it. You may even have to have a second Internet connection installed in order to dedicate that bandwidth to your work.
You may be able to deduct the cost of buying high-speed Internet on your taxes. Keep records of how frequently you use your home Internet connection for business use and for personal use and share the records with your tax advisor. If you have a space dedicated to work, you may be able to get a bigger deduction on your taxes for other things, such as power. After all, you'll probably be using a lot more heat and air conditioning when you work at home as opposed to when you leave home and go to work.
Although we are living our lives more digitally, we still need basic office supplies when working from home. Home-based employees may go through items like notebooks and sticky notes very quickly. You may also need to buy certain computer software in order to do your job or a comfortable office chair. These types of incidental expenses can start adding up quickly.
When people think about food costs when working at home, they usually think they'll end up saving a lot of money. After all, you can walk to your refrigerator instead of going to a restaurant if you forget to bring your lunch. The only problem is that you have to put something in your refrigerator in order to get it out. So if you don't keep a close eye on your habits when shopping for groceries and planning your meals, you can find yourself splurging a little. And if you don't get what you need from the grocery store, you can still find yourself going out to a nearby restaurant. And if you decide to do a lot of your work at a nearby coffee shop, you're probably going to be shelling out a lot of money on that latte.
If you are a company employee, you have access to company benefits, such as health insurance or gym memberships. Freelancers and independent contractors have to pay for these things out of their own pockets. If you are leaving a company to become a freelancer or independent contractor, you will have to start budgeting for your own health insurance and every other benefit you will lose by making the transition.
Want to attend a conference, visit the office, or meet with a client? These trips add up, which means money leaves your pocket. You'll need transportation (car/taxi/plane/train/bus). If you drive yourself, you'll need gas and will probably also have to pay to park. If you're meeting a client for coffee or lunch, you'll have to pay for your order.
Keep in mind that travel and meetings also eat up work hours, notwithstanding the countless phone calls, emails and other work done while you're on the go. If you're a freelancer or independent contractor, doing these things away from home means that you'll probably also have to make up the work later when you might ordinarily not be working.
If you work at an office, you probably feel relaxed when you get home from work. If you work from home, you might feel like you won't be able to relax unless you get out of the house. Unfortunately, getting out of the house often involves spending money, whether it means going out with friends, taking an evening class, or just getting a cup of coffee.
Know your habits and adjust your budget accordingly. Try to find ways of getting out of the house that don't involve spending money, like going for a walk around your neighborhood.
Many activities fall under the umbrella of professional development, from networking events to classes for professional certifications. They allow you to meet new people while also building your skill set. But professional development still costs money. If you're an employee, you might get a bit of help from your employer, but you'll still probably end up footing the bill for the cost of the course, the transportation to get there, the coffee or meal with the folks you met after the course ends, etc.
Professional development is important, especially since people who work from home don't have the same opportunities as those who work in the office. But make sure that it's actually worth it before you spend the money. Research the event before you sign up. Will you learn a new skill or build on one you already have? Who else will be there, and are they at the same career level as you? Are there any reviews or video or audio recordings of previous events available?
This cost depends on where you live and where the company you work for is based. Some states require everyone who works for a company in that state to pay income tax on the money they earn while working for that company, even if they don't live in that state and even on days when they are working for the company in another state. As if that weren't bad enough, some states require those same employees to pay income tax on the money they earn while they are physically working in their state, even if the work is for an out-of-state company. It's possible to get taxed twice.
According to the North Carolina Department of Revenue, if you do not live in North Carolina but you earn money from "a business, trade, profession, or occupation carried on" in North Carolina, you have to file a tax return in North Carolina. If you aren't sure about the requirements of the state(s) where you live and work, check with a tax professional or the state's revenue department.
Depending upon the type of work you'll be doing, you may need to increase your insurance coverage or take out supplemental insurance policies. Standard homeowners or renters insurance policies often exclude business property, especially if that property is very expensive. So you'll want to talk to your insurance agent before you work from home to make sure you're covered and how much more you're going to spend if you aren't covered.
Working from home, it can be easy to blur the line between work time and home time. And you may find yourself working more than you should. This lowers your effective money earned per hour rate and can have significant impacts on your home life. So make sure you set firm start and end times so you don't ignore your home life.