By Ryan Velez
For anyone who’s had to deal with an irritating boss, hard commute, or many other issues common to the workplace, the life of being self-employed sounds like a dream. Indeed, it is this sense of freedom and autonomy that is driving more and more professionals to try their hand at working for themselves. However, with these benefits come new responsibilities, and even after you’ve navigated those initial unsteady waters, you need to be vigilant to make sure that your finances are under control, both to support your business and personal life. A recent Black Enterprise article has provided some valuable budget tips for the self-employed lifestyle.
During those first few months of self-employment, it may feel that there are a thousand different facets that require your attention and money. One way to help alleviate some of your stress is to come up with a bare-bones budget, with just the basic expenses that you need to survive. With any luck, you will never need to use it and are making enough to save extra on top of your expenses. However, knowing that you have a base budget will be a valuable tool both in the beginning as well as during those lean months.
As your business grows it’s important to demarcate the lines between business expenses and personal expenses. The reason for this is two-fold: First – it will save you potential headaches during tax time (more on that later) and Second – it will clear up exactly how much expense your business incurs per month. Knowing this number will guide many of your decisions moving forward. Take the extra steps to separate the two incomes by creating a business checking account and depositing the money you need to spend on the business each month.
When you are self-employed, you become solely responsible for your taxes, a shock to those who have been traditional employees for their entire careers. As a result, take the time and money to find an accountant you trust to find out exactly what your tax rate is and how much you need to set aside each month for taxes. Be sure to keep track of your quarterly tax pay and expenses as well.
Along with making sure to save for taxes, the ebb-and-flow nature of self-employment and its profits mean that setting aside money for savings is more important than ever. Choose a fixed amount of money to transfer to your savings account each month, so should you lose that client or other sources of income, you will have a bit of cushion to right the ship.