Self Employed? Here’s How You Can Keep Your Money in Check
Starting your own business offers amazing freedoms, and while it is definitely difficult, the ultimate reward is knowing that your efforts will pay off. The trade-off, at least in the beginning, is that there is significantly less predictability. Irregular cash flow, unclear profit, and an unstable salary can make personal finance planning an extremely difficult matter for an entrepreneur. However, with a little forethought and preparation, it is possible to mitigate the worst effects and strive to achieve some kind of financial security for yourself. When it comes to ensuring your financial arrangements, take the initiative and your future self may very well thank you…
Keep A Budget
Many of us are still failing to address the fundamentals of financial planning by creating a personal budget. If your income is irregular, budget for the worst-case situation for a month. Understand what expenses are needed (like mortgage or rent), what expenses are necessary but can be budgeted for (like food or electricity), and what expenses are wholly optional (like gym memberships or subscription services). Make it a habit to compare energy providers and shop for store-brand groceries on a monthly basis to save money. That way, you’ll know the very bare minimum need to get by during a really poor month, which is fairly likely in a small business. Assure that you save enough money to cover taxes as well, so that you are not caught off guard when the self-assessment tax deadline approaches.
Prioritize Establishing An Emergency Fund
Ideally, you would not have left your regular paid position without first putting money aside in an emergency fund, but unexpected events can occur from time to time. After determining your monthly budget, attempt to save three times that amount in case of a sales slump or loss of a major client. You should also speak to a high risk processing attorney in case you run into any sticky situations with clients.
Insure Yourself And Your Business
Insurance is something that you should never skimp on, even more so if you have a dependant family. If you don’t have access to employer-funded sick leave, it’s critical that you have both public liability and personal insurance in case of an accident or illness. There are a number of options available to you when it comes to purchasing life insurance, and you should do your research to find the best deal possible. Of course, no one wants to consider the possibility of severe illness or even death, but without the buffer of working for a huge corporation and all of the employee benefits that come with it, you must weigh your options in the event of less-than-pleasant circumstances.
Consider Making Some Investments
As soon as you’ve established your emergency fund, put your other funds to work for you by establishing an investing portfolio. This does not necessitate large sums of money; several online investment platforms allow you to begin investing with small amounts. If you don’t have the time or mental energy to keep up with individual stocks, a mutual fund is a good place to start. A mutual fund is a portfolio of stocks that has been pre-packaged by financial advisors, and studies have shown that the returns are generally just as good as those obtained by picking stocks yourself. Simply log in, select an investment amount, and a risk profile, and you’re good to go. This can keep cash flowing even during slow months.