Financial Advice For Self-Employed People
There are many benefits to being self-employed. You have more options in terms of working hours, you can establish your own routine and work on something you are passionate about. However, it can be overwhelming, especially when you first start working for yourself. Here is some advice so you can prepare for self- employment.
Have an emergency fund
One of the potential disadvantages of self-employment is that it can be very inconsistent in terms of funds, especially when you first start. Therefore, it is recommended you have some kind of emergency fund.
One way of doing this is by working out your monthly expenses. After you have made your money for the month and taken away the expenses, you can then keep a percentage aside for the fund. It may not sound like much, but over time even the smallest amounts can add up.
Another aspect of this is taxes – if you earn above a certain amount, then you will be expected to pay taxes on what you earn. Having money set aside will help ensure this will avoid problems later on.
Get a separate business account
Another factor to consider is how to calculate expenses. One way of keeping track is to keep a separate business account. There is also software available that will allow you to track expenses such as mileage for business travel.
Some people do work based on commissions. There are options in terms of how you want to be paid, but it is recommended you have some form of deposit upfront. This works both for you and the client and you get the rest of the money when the work is completed, so the client will pay if they are satisfied with the work, but you still have some money while you are working on the project.
You should also consider the amount of time that goes into a project and make your rates clear to show what you charge for, as well as any work that you are not prepared to do.
You can also use payment processing platforms to make this easier. A lot of these platforms will take a percentage from each transaction, so you may wish to add that to the cost of any commissions.
Get out there
One tip that people recommend is to not overly focus on just one client – while it is natural to want to commit to clients early on, ideally, they should not take up more than 30 per cent of your time. Social media, networking events, flyers and trade fairs are all examples of ways of spreading the word about your business.
Hire an accountant
When you first start working for yourself, it is natural to look at the expenses you have to pay and try to spend as little as possible. An accountant or book-maker can make life easier in the long term and help you manage your money more effectively.
We can help
At Larcomes Financial Services we have been spending many years as part of a family firm looking after the needs of our clients. If you would like to know more about how we can help you get more out of our business, then please contact us so we can go over your individual financial circumstances in more detail.