There’s never a bad time in life to become self-employed. However, this is not an easy thing to do as it requires a good share of financial responsibility. Learn how to make it as your own boss, minimising all the financial challenges this entails.
Enhance your budgeting skills
Budget planning is different because when you’re self-employed, you’ll rarely have the same income each month, so you must be prepared to adjust your budget depending on how much money you’re making. Paying your bills first should be a top priority and, if you feel that on a certain month you will be unable to pay on time, then you must prioritise which bills need to be addressed first. Any home loan, mortgage or car loan should be the first bills you pay no matter what.
Create special budgets for those months that you identify as slow for the business and learn how to handle them before they arrive. A good way to accomplish this is by having a strict distinction between your personal and business expenses. This will help you not just to order things but it is a proven aid when it comes to dealing with taxes and similar.
Tax is a serious matter
Dealing with taxes as self-employed is overwhelming but it is also vital to keep your business’s stability well guarded. It is important that you keep them present at all times. Remember that employees get deducted automatically by their employers which is not the case for the self-employed. You must look after your own tax obligations to avoid costly complications in the long run.
Meeting deadlines and avoiding mistakes when filling the forms out is essential, so try to make quarterly estimated payments. Keep present that not filing documents incorrectly or after the deadline will likely result in a fee.
This is a good tip not just for the self-employed, but it entails more responsibility for them. We already know income fluctuates when you’re self-employed, so being prepared for the unexpected should also be on your top-five priority list.
During the slow months, you may be forced to dip into your emergency savings to cover the debt, like a home loan repayment or a second mortgage, or even to buy food. A good emergency fund is the one that is strong enough to cover at least six months of dire financial straits. Experts recommend holding 10% of your income for emergencies.
Never stop thinking about retirement
Some small business owners tend to put aside any retirement saving efforts while they achieve solid ground with their new business, sometimes it’s not even their decision, they just have to. If this is happening to you, remember that even though it is a normal thing to happen, you shouldn’t ignore retirement for too long or for good.
Of course that working to make your business successful is important, you need to think about the moment when you want to retire and start giving it the importance it deserves. In the end, it’s all about having a good retirement.
Boost your earnings and savings
Right now many people – both the employed and self-employed – have found a way to boost their earnings by finding out if they were affected by mis-sold PPIs policies in which case banks are obliged by law to give the money back after years and years of wrongfully charging mis-sold PPI insurance policies to its customers.
You can use the money for your personal expenses without touching your business income. This can make more sense if you’re just starting your business and don’t want to touch your business earnings just yet. You can find if there’s unclaimed money for you here.
Think in percentages instead of amounts
For the self-employed, it is important to manage money thinking of it as percentages. You have an emergency fund for which you have designated a specific monthly amount to be deposited. What happens during the months where your income increases more than average? You may be saving too little unnecessarily.
If you think of money as percentages you can save proportionally to the way the month develops. So instead of saying ‘x’ amount each month, you save 5% or 10% or agree on a percentage that you can afford.
Being self-employed is a great accomplishment but it entails all kinds of challenging experiences. Follow these guidelines and prepare yourself for success.