It’s an acquired skill to manage finances efficiently and thoughtfully, and it’s an especially important skill for a self-employed person. From bank fees due to unexpected overdrafts, to maxing out credit cards without even realizing it, there can be so much that goes wrong if you don’t address the financial situation before it tumbles out of control. Before you head down the road to self-employment (or even if you are already there), take a look at these money management tips that will help keep you out of financial, professional, and personal stress.
Save for Your Taxes. This tip is one of the most essential for any self-employed person. You know what’s worse than paying taxes? Not being prepared to actually foot the bill! You should follow the 20% rule, which is 20% of everything you earn should go straight into a savings account that is dedicated to your taxes. At the end of the year, you can use this money to pay the bill, and the leftovers can go to future savings or be used as a way to reward yourself for your hard work. Save now so you don’t get caught off guard in the future.
Budget, Budget, Budget. Being financially secure is all about planning your finances. One of the first things you need to do when thinking about your business is to sit down and plan out a budget. What will you need to spend – each year, each month, even each week? When and why does it need to be spent? What does it leave you with? What are the benefits, and do they outweigh to disadvantages? These are just some of the questions you have to ask yourself when planning a budget. Any good business has a solid financial budgeting plan that it can refer back to in order to prevent financial trouble.
Always Plan Ahead. Technically speaking, this is also known as the emergency fund. When you’re self-employed, there is never a guarantee that you will always have work or always be paid on time. When you plan ahead, you are planning for a few months of no work or very few assignments coming your way. This fund should have between three and six months’ worth of expenses saved up so that you don’t run low on basic needs and are able to pay your bills on time. The ebbs and flows of work are a natural and common occurrence for any self-employed person, so planning ahead is vital to staying afloat.
Pay Yourself. This is great for helping the finances in your business. Select a comfortable amount to live on each month and take that out of your earnings. The rest continues to help the businesses profit margins and you can leave any excess on really good months to compensate for any bad ones that might happen later in the year or have already occurred.
Think About Retirement. It may seem ages away, but we will all retire one day, and as a self-employed person, you have to be responsible for your own pension. While saving up money for current and near future needs, you should also put aside a little for your retirement fund. It might seem daunting and pointless now, but your future self will thank you right now for thinking of their needs!
To Conclude. Money management is about two things: planning ahead and self-discipline With these two aspects, you should be just fine with handling and saving your cash, which will help both you and your business to flourish. It’s not always an easy path to take and we get that it might be a struggle at times. Just remember all the good that comes from being your own boss, and you will find the strength to really save your cash and live comfortably.
