If you’ve finally broken out of the 9-5 and decided to take the big leap into self-employment, congratulations! While you may still be buzzing from the novelty of working for yourself, there’s a lot to do to make sure you can turn it into a long-term gig.
When first starting out, it’s important to make sure that you’ve got your finances in order. The better you know your finances, the easier you’ll stay afloat. Let’s talk about five financial tips for being self-employed.
One of the most important things to know about budgeting when you're self-employed is that it looks slightly different from conventional budgeting. This is because your monthly earnings are going to fluctuate, and you'll need to be prepared for this.
With this in mind, remember to prioritize your bills. You also need to know what expenses are essential and what isn't so that you can prepare for them in the slower months.
This seems like nothing more than common sense, but now that you’re self-employed, you’ll need to be setting aside money to pay tax – and this is easier said than done.
When you're first starting out, it can be easy to forget or even know how much tax you'll need to pay at the end of the first financial year. This is why it's good to open a separate account where you can save money for tax so that you don't get caught out when tax season rolls around.
Before you get the ball rolling too much, it’s vital that you think about what your initial costs will be to becoming self-employed. If you don't have the budget, you need to successfully set yourself up at home, consider a short-term loan to cover your bases.
Anything from a personal loan to a title loan quote is ideal when becoming self-employed, because they are short-term, low-risk loans that can be paid back later.
When you do start to earn a bit of money, and you’ve paid your bills and put money aside for tax, don’t forget to keep some in an emergency fund, too.
You never know when you’ll need a bit of a financial boost, and the more you have saved in your emergency fund, the more you will be able to cushion the blow.
While you may not be working for someone else anymore, there’s no reason why you can’t still track your mileage when you drive around. You’d be amazed at what you can expense when it comes to doing your taxes at the end of the financial year.
If you use your car to meet with clients, pick up supplies, or just network, it's worth tracking what you spend in gas.
Taking the plunge and choosing to go self-employed is an equally exhilarating and scary thing to do. The biggest question mark over your head may be: what if it doesn’t work out? This is why it’s so important to have your finances sorted from the very beginning. Use these tips to create a solid foundation, so that you can be prepared for the worst.