Any individual who has been self-employed will tell you the same thing: there’s a lot to learn! Even if you’ve planned it well, there is so much to deal with that it can often be easy to lose site of the fundamentally important business of money management.
After all, there are so many different aspects to consider. Should you work from home? How can you market yourself? How do you go about paying taxes? Should you set up as an umbrella company or limited company?
But while all of these aspects of self-employment are important, the way that you manage your money is critical. Get that wrong and your self-employment may fail before it has even begun. So how do you make sure that your money management is effective? Here are three essential tips to help you get your money management on track.
Schedule money management time
When you are self-employed, it can seem as though there are 101 more important things to do than sit down and assess your finances; but that is a false perspective. In fact, money management is so important that you should set a regular time for it each week. Mark out an hour in your calendar every week to sit down and look over your finances, and make sure that nothing short of a major crisis stops you from fulfilling the task.
Prioritise debt repayment
Being self-employed is hard enough without a weight of debt hanging around your neck. That’s why you should prioritise repaying your debts. You won’t be able to pay them off all at once, but if you make sure that dealing with debt is top of your list whenever you have any spare cash, you will soon find that the debt is dwindling. Start by listing your debt, and setting a target for when you want to be completely debt free.
Save for your taxes
If there is one mistake that self-employed people make repeatedly, particularly if they are new to this way of working, it is not saving for their tax bill. That is understandable, particularly if you were previously employed and had your taxes deducted by your employer. But it is one of the main reasons why self-employed people can get into difficulties. Get into the habit early on of putting aside enough money to cover your tax bill, and whatever you do, do not touch that money until it comes time to pay your taxes. HMRC have many resources to help the newly self-employed but they are notoriously unforgiving towards those who fail to set aside enough money to meet their tax demand. Don’t let that be you!
Consider Your Retirement Fund
As a self-employed individual, your retirement pot might not be something that’s significantly substantial if you’ve been working as a self-employed person for a while or intend to for the foreseeable future. The government will only provide you so much, and therefore, it’s important that you’re paying money into a retirement fund so that you have plenty of money available to pay towards any retirement costs such as paying for Enterprise Retirement Living, for example. Make sure that you’re putting away some extra funds on a regular basis into a personal savings account or retirement plan.
There are many more aspects to being self-employed, such as ensuring that you save towards retirement, and getting into the habit of paying yourself a wage once a month, rather than dipping into your company funds on an ad-hoc basis. But if you follow these three essential tips, you will improve your chances of making a success of your self employment.