Living Without A Fixed Income – Money Management Tips For The Self-Employed

When your business is small, your financial challenges are likely huge, especially if you are a sole business owner or a freelancer.

So when you have plenty on your plate – from paying health insurance to business taxes – how do you make it work? 

Here are some ways to manage money when you are self-employed.

1. Build a Solid Financial Plan

When you are self-employed, it is best to have a set of strategies, goals, and milestones that help you achieve your short-term, mid-term, and long-term financial goals. 

This generally starts with budgeting. Budgeting is important to figure out your income-expense plan. The key to happiness is having enough wealth to enjoy the present while saving for the future. Budgeting ensures this stability. 

You can also keep track of your finances using a spreadsheet. It could serve as a to-do list to act upon after a detailed perusal. Further, this gives a good estimate of your progress.

2. Create an Emergency Fund

An emergency fund is essential for those who live without a fixed income. It is the money you have to set aside in case of an unexpected expense. 

For example, when work is slow, an emergency nest egg is a smart way to navigate through market inflation. 

Intended for sole proprietors, a solo 401k calculator estimates balances and payouts. This way, your finances are calculated accurately, helping you set aside money for emergencies.

If you’re self-employed, your emergency fund should be at least five months’ worth of living expenses. 

While this might be a hefty sum, it can relieve you from a surprise car repair, an inevitable medical bill or unforeseen legal expenses. 

3. Track Expenditures

Following a consistently monitored system to record all your expenses is a sound financial practice. If not done, you could lose all your savings. 

Some expenses can be claimed for tax purposes. Accurate bookkeeping, using spreadsheets and mobile document management tools, finance tracking apps, and various accounting software, can help figure this out with ease. 

That said, always seek professional advice from an accountant for guidance on expenditure. This ensures that you keep them organised and gain financial transparency to make informed decisions. 

4. Invest in Protection Products

If you are running a standalone business or are a freelance employee, you do not receive the benefit of paid leave. You work continuously for high rewards. 

So what happens if one day you’re unable to work?

This is why factoring in financial protection products is the best way for you to move forward. It is the only path towards financial security and peace of mind.

Life insurance is mandatory to protect your family if they rely on your income alone. This insurance money mostly comes to your aid when facing a critical illness or injury. It guarantees that your dependents receive lump sum payouts in the event of your death. 

In the long term, income protection insurance, aka permanent health insurance, will also be beneficial. This ensures that you have ample money in case of sickness or disability. 

However, the benefits cease once you get paid work or retire. 

Conclusion

The above-listed measures can ensure financial security even when your income is inconsistent.

Moreover, if you have taken up the role of both the employer and the employee, a solo 401k calculator is a great assistant! Easily determining the maximum contribution ensures you can spend your time and energy on other important business tasks. 

Being your own boss has pros and cons. Therefore, manage your money efficiently and take control of your financial future.