Adding Up the Numbers: Managing Your Money When You’re Self-Employed
Being self-employed has many benefits, and the freedom of being your own boss is only one of them. But managing your money is often one of the trickiest parts of self-employment, and many newly self-employed people struggle.
Here are some tips to help you make the most of your finances and manage your money better when you become self-employed.
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Hire an Accountant
Hiring an experienced accountant is the first thing that you should do if you are planning to become self-employed, even if you are not earning any money yet.
A good accountant can provide you with advice and assistance even before you start your business. They can provide you with advice on managing your money, and they can help you make the right decision about which type of business you should have.
They can also provide you with general advice about your business that can be invaluable when you are getting started.
Even better, a good accountant can help you to save money on your tax bill, and they might even help you to save more than you spend on their services in the first place. They can also help you plan for paying your taxes (more on that later) to avoid getting into trouble.
Create a Budget
When you first start your business, make sure you create a budget and include all of your expenses in it. This way, you will have a good idea of how much you will be spending each month.
Include expenses like your rent, the internet, telephone, the software you use, paid subscriptions, and more. Your budget will be a clear guide that you can refer to regularly.
If you end up getting sued by a client, this could have a serious effect on your finances. Even if a claim is made against you and you have done nothing wrong, you will still need to pay for legal assistance.
This can seriously harm your small business, and it could even make it impossible to continue.
Insurance can help. Liability insurance for self-employed people can cover many situations where you might experience problems, giving you peace of mind.
Look at some of the options provided by Next Insurance to see if any look suitable for your situation. Then get insured and don’t worry about potentially devastating claims being made against you.
Save for Taxes
You will have to pay your taxes yourself when you are self-employed, so make sure you put away enough money to make your payments.
Aim to save about 35% of all your earnings. You may end up paying less in taxes after you have deducted expenses but aim to save up more than you will need when your tax bill arrives.
Keep up to date with your tax payments to avoid fines and getting into difficulties. And speak to your accountant about this because they will help you plan for it.
Take a Salary
One of the best things you can do is set a monthly salary for yourself. Try to earn more than you need for your salary each month. Then, rather than spending any extra money you make, save it. Then when you have a bad month, you can dip into this fund.
Put Away Money for Retirement
Don’t forget about saving for your retirement. It may seem a long way off yet, but now is the time to start saving. Put away a small percentage of the money you earn each month and ask your accountant about their recommendations.
Save for Emergencies
It’s always good to put some money aside for unexpected events. When you are self-employed, you need to take this seriously. You might become ill and be unable to work for a couple of months. What will you do in this situation?
An emergency fund can help. Aim to save up enough to keep you going for between three and six months should you be unable to work. This will provide you with a good safety net. You never know what could go wrong, so don’t take any chances. Start saving as soon as possible.
Manage Your Finances Properly
Learning how to manage your finances is something many people struggle with when they first become self-employed. There is a lot to learn, but it’s important that you do so. It can help you to avoid problems and ensure you get more out of the experience of working for yourself.
So start planning your budget today and speak to an accountant. Start saving money for taxes, retirement, and emergencies. Then get your business off to a great start with confidence that you are going about it in the right way by managing your money well.