Self-employment is great, but it also comes with financial challenges and struggles, that you have to deal with. Uncertainty about the cash flow is what can bring many self-employees down and make them feel stressed continuously about.
Moreover, saving money can be much more difficult, when you are not sure about your finances at all. What if I told you that it’s possible to feel entirely different about your financial situation and even save money as a self-employed?
There are a few easy steps that you can follow in order to save money and feel less stress about your finances.
Creating a financial cushion
You probably cannot do much about the uncertainty of your income. You definitely can do your best when it comes to your work quality or communication skills, but, to be honest, financial fluctuations won’t probably be stopping any time soon.
What you can do, is create a fund for unexpected situations, that would sit peacefully in your bank account. Psychologically, having an emergency fund, aka, a financial six-month cushion in your bank account, feels great, despite your monthly income and the uncertainty of it.
You can gradually create this financial cushion by dedicating a certain percentage or a particular amount of your income each month. This should be your number one priority as a self-employed, as it will allow you to concentrate on other areas of your business, rather than constantly think about your cash flow.
Planning your expenses and saving is much easier when you create a budget. Budgeting allows you to evaluate your weak spots, when it comes to spending, as well as see your financial situation as a whole picture.
Also, budgeting is highly beneficial, as it allows you to improve your money management skills, by continually staying on your financial track. If you enjoy using apps for managing your daily activities (fitness, transportation, communication, etc.), definitely consider checking out ones that offer financial assistance, such as Zuper.
Always set aside for taxes
Tax paying period can come unexpectedly, but it shouldn’t be your case if you take good care of your financial situation. One of the biggest mistakes of self-employees is not setting aside money for taxes at the moment of receiving funds.
This can lead to lots of frustrations, where you need to take money out of your emergency fund to cover your taxes. To avoid this, set aside approximately 20-30 percent of your income after each paycheck to your tax fund.
To sum up, self-employment offers some truly amazing benefits, such as freedom to manage your time, ability to decide on the working hours and going on vacation whenever you want to.
However, it also comes with a few downsides, such as financial uncertainty. Even though uncertainty about the cash flow is real, it is absolutely possible to save some money when self-employed, if you learn some financial management tricks.
Monitoring your income and expenses is essential if you want to achieve a healthy financial score and save money when self-employed.