Ask Away...: Keeping Your Finances in Order When You’re Self-Employed

Thursday, January 25, 2018

Keeping Your Finances in Order When You’re Self-Employed



Deciding to take the plunge and become a self-employed worker is always exciting. You’re casting off the shackles of the mundane, and beginning a journey that could take you anywhere and everywhere. You don’t know where it’ll lead to! However, you’re still going to need to eat and stay legal while you’re figuring out the path you’re going to take. That’s why it’s imperative that you keep your finances in order. Below, we show you how to do it.




Source: Pexels.com

Get Ready For the Switch


You should begin your financial journey before you make the switch. You might be eager to get your new life underway, but at the moment you’re likely to have a job with a semblance of security; at the very least, you know that there’ll be money coming in at the end of the month. Before taking your own path, you’ll want to use this job as a way to build up your finances. They also say you should have the equivalent of three to six months salary in the bank. If you have, then you’ll have some breathing room while you’re making the transition.

Divert Funds to Savings Account


You won’t have left the security of your job without a plan. Hopefully, you’ll be making money from the first day after you leave your regular job. While it might not be as much as the salary you used to earn, it’s important that you divert a portion of your earnings to a savings account. After all, there’ll be no-one else around to put money in a pot for you! Pick a percentage that you think you can manage (though don’t make it too small), and set up a direct payment each month. You’ll be building your savings account without even realizing it.

Remember Taxes and Other Expenses


You might think that you’ve left the usual business world behind, and, to a degree, you have. But only to a degree. You still have to live within the laws of the land, and that means making sure you’re compliant with taxes and other necessary expenditures. When you become self-employed, you’ll need to learn about things like the 1099 form, which you’ll receive from any client that pays you more than $600 in a year. You’ll also need to learn how to figure out your self-employment tax. It might not always be fun, but it is necessary!

Budget for “Average Income”


You’ll be well served by making a budget of your incomings and outgoings. However, when you’re self-employed, you won’t have a fixed ‘incomings’ number, because the amount you earn will change month by month. Instead, figure out an average monthly income, and go by that. Sometimes you’ll have money left over, which can go straight into your savings account.

Treat Yourself Like an Employee


Ultimately, it’s important that you treat yourself as an employee. If you take your finances seriously when you’re self-employed, then you’ll be able to avoid the problems that many others who take the plunge run into.



2 comments:

  1. As much as someday I would LOVE to be self employed I don't see it happening any time in the near future, sigh.....

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