7 Critical Financial Tips for the Self-Employed
Dan Levenson June 12, 2018
Being self-employed allows you a number of important freedoms. Chief among them are the ability to set your own schedule and the freedom to focus on your passions without answering to anyone else.
Unfortunately, it also means that you’re 100% responsible for your own finances—and that means that you are the only one who will be able to manage them correctly.
By following these key tips, you can improve your financial standing and make it easier to manage your overall cash flow.
Tip #1: Create a Safety Net
Business might not always flow as smoothly as you’d like. There will be times when it slows down, leaving you struggling to keep up, financially speaking. By building a safety net, you can ensure both that you’ll have the finances necessary to keep your business running and that you will be able to manage your personal finances even when your paycheck may need to drop for a period of time.
Tip #2: Always, Always Pay Your Taxes
Business taxes are a complex web that can, at times, be difficult to manage—but that doesn’t mean you can avoid them. Failure to pay your taxes, including both business and personal taxes, can have severe repercussions for your finances down the road. Make sure that you keep up with your taxes and pay them honestly and fairly to avoid future trouble.
Tip #3: Find All Your Deductions
Deductions can have a big impact on the taxes that you’re responsible for paying. Make sure you work with an accountant to find all of the important deductions that will reduce your tax burdens, from credits for energy-saving installations like solar panels to deductions for items that you’ve had to purchase for the business over the course of the year.
Tip #4: Plan, Plan, Plan
Create a budget and stick to it—both for yourself and for your business. Having a plan is critical to every aspect of your business, but nowhere more than in your finances. You need a budget that will help you plan for future expenses, permit growth, and prepare you for challenges that you may face in the future. Make sure you know what expenses are coming and have a plan in place to pay them.
Tip #5: Pay Down Debt Quickly
Whether you have personal debt that you need to take care of or debt related to starting your business, the faster you can pay down your debt, the better. Make sure that your budget includes a clear plan for reducing your debt—and that doesn’t just mean that you should make your minimum payment every month. Keep in mind that the sooner you pay down your debt, the less you’ll pay in interest over its lifetime—but do make sure that your contract doesn’t include early payoff penalties.
Tip #6: Plan for Your Future Retirement
When you own your business, you’re responsible for handling your own retirement planning—including all of your contributions. No matter how much you enjoy owning your own company, the day will come when you decide to retire, whether as a result of your physical health considerations or simple desire to participate in more leisure time. Make sure that you have plans in place that will make retirement as smooth as possible.
Tip# 7: Get Insured
One key element of your financial planning is the insurance you take out for every important element of your company. A solid insurance policy can be the difference between weathering a financial storm with ease and struggling to deal with a problem that could lead to financial ruin. This is especially true if you have a home office, as there are certain things that simply cannot be covered by your personal homeowner’s or renter’s insurance.
Having a firm grasp on every aspect of your business is the key to planning wisely and achieving your goals. If you’re just starting your own business (or have been self-employed for years, but just want to get freshly organized), download our free Small Business Plan Worksheet!