When you are working on a self-employed basis, it can sometimes be difficult and daunting to be in control of your finances. This is especially true if you are new to self-employed working and are used to working for an employer. Gone are the days when you were just paid for the hours that you worked and didn’t have to worry about other factors. That being said, once you get your head around managing your finances when self-employed, it can be fruitful and give you more freedom to work however you want to.
Let’s have a closer look at some of the ways you can control your finances when self-employed:
Track Your Cash Flow
The biggest mistake you can make when working self-employed is not tracking your cash flow. You need to make sure you know what is coming in and going out at all times. If you run an e-commerce business, it’s a good idea to connect Shopify with QuickBooks. Then, you can invoice with ease and have a real-time track of the money coming in. It’s a good idea to have a separate bank account where you can keep all your business income and outgoings in one place—this way, you avoid having them mix with your personal finances.
Pay Yourself A Wage
It can be very easy to mix your self-employed earnings with your personal finances. And although your self-employed earnings are technically all yours, it’s still a good idea to pay yourself a wage and keep some funds to one side so you can afford to pay expenses and things like tax and national insurance. Set a date and pay yourself the same wage each month. Not only will it help you keep track and build a healthy cash flow, but it will also mean you can budget your personal finances.
Create A Plan
Even if you are working on a self-employed basis, you must create a small business plan. You may not see yourself as a business. However, you are a small one-person business, and you need to have a plan in place. Even if it is as simple as setting out how many clients you want to have after 12 months or it is just something that predicts your cash flow, you need to have something in place so you are able to track your progress.
Save
It’s a good idea to make sure you have savings in place when you work for yourself. You may have some months where you don’t earn as much as the next. If you have savings in place, you can still pay yourself a regular wage and not worry about being able to pay your personal bills. Try to build up at least three months’ worth of income. You should also consider saving up enough to cover the tax and National Insurance that needs to be paid.
These four tips should help you to stay on track with your finances when you are self-employed. Do you think you will use any of these tips? Do you have any other tips that could help others? Please share them in the comments below.
