Mike Johnston
Money Management Tips, There is nothing inherently wrong with working for someone else, and in fact, you can build a thriving career and achieve financial independence as a talented employee. However, if you’re ready to set out on your own, launch your own successful business, and become your own boss, then you should know that self-employment offers some amazing personal and professional opportunities. That said, self-employment comes with its own set of challenges, and one of your main concerns is probably how you’re going to manage and optimize your finances.
Financial management will suddenly take on a whole new meaning when you’re in charge of all the finances in your company. You will have to create a budget, set financial goals, tend to meticulous forecasting, set money aside for taxes, cut needless costs, and do a lot more to ensure the financial stability of your business.
With all of that in mind, let’s put the whole thing into perspective and talk about the key money management tips you need to follow as a novice business owner.
Table of Contents
It all starts with financial plans and goals
To start, one of your first priorities should be to create a sensible budget and to set financial goals that are realistic and attainable, but also conducive to long-term business growth. You can begin by listing all the personal and professional expenses on a monthly basis, including how much money it takes to keep your business afloat. This will be your financial foundation, a break-even number you need to meet in order to make money as a self-employed worker.
Once you have a detailed financial requirement list, you can then start setting short, mid, and long-term financial goals for your business. It’s important to be realistic at this point and act on sensible data, so make sure to do your research to figure out how much you can expect to earn in your industry as a new business. This will also heavily depend on your experience and expertise.
Put yourself on a salary
Becoming a business owner or simply choosing to be self-employed comes with many perks and advantages, one of them being the opportunity to establish true financial independence and amass wealth over the years. This is one of the key reasons why people tend to strike out on their own, but before you can get to that point, you need to be very careful with your spending. Mainly, you need to put yourself on a salary.
While it might seem appealing to start enjoying all your profits as soon as the cash starts rolling in from clients, customers, and investors, you actually want to refrain from spending more than you need to. Putting yourself on a reasonable salary will allow you to allocate financial resources towards the development and success of your business over the long term, which should be your primary goal. You should prioritize long-term financial stability over immediate gratification, so be frugal and invest in your business first.
Save up on car insurance
Being self-employed can bring about many new expenses you never thought of, and you need to be ready to cut extraneous expenditure whenever possible. For example, building your own small business will mean chasing down potential clients and hopping from one town to the next, forcing you to spend more on corporate travel and fuel. You might not have thought about it before, but now is the time to cut your vehicle expenses, starting with the insurance.
You need good car insurance, but you don’t need to break the bank just to cover the premium. Instead of wasting money, you should compare the best car insurance companies in your area and switch to an insurance plan that’s priced more reasonably, and preferably offers more coverage. Do this not just for your vehicle, but your business, your home, and yourself.
While you might find it difficult to cut costs elsewhere, insurance is one of the areas where you can save up the most, because your current insurance policies might very well be bleeding you dry.
Set money aside for taxes
When you’re employed at a company, you don’t have to worry about taxes, as they are automatically withheld, but when you’re self-employed the burden of managing taxes falls on your shoulders. This is one of the most common mistakes novice entrepreneurs make – forgetting to budget for taxes and set money aside throughout the year.
Whether you’re making money by playing video games or if you have a proper corporate entity, you’re now paying taxes for your business, so make sure to start saving right away so that you’re able to cover your taxes when the time comes. You can talk to a professional accountant to see how much money you’ll need to save aside for taxes, and what the taxation schedule will look like for you.
Start planning for retirement
As a self-employed worker, your main concern might be how you’re going to make money from home, and while that is your number one priority, you should also start planning for your retirement. It might seem a long way away, but now is the time to start setting finances aside for your silver years, and to make a plan for early retirement if possible.
You can do this on your own, of course, but the best course of action would be to talk to an experienced financial planner who will lay out a concrete savings and investment plan you can follow to amass wealth and secure your retirement in the decades to come.
Over to you
Being self-employed is an opportunity to achieve your professional goals and build the life you always wanted, but to make your dreams a reality, you need to take the right approach to financial management. With these tips in mind, go ahead and create a plan that will ensure the success of your new career path.
Mike Johnston is an experienced writer, blogger, and editor with a background in marketing and creative writing. He’s produced thousands of pages of original, engaging content for numerous online publications throughout his career. Mike’s specialties are business and technology, but he also often covers careers, lifestyle and work-life balance.