Being your own boss may seem glamorous. And while at times it is, there are a lot of challenges that go along with calling the shots. Whether you’re a freelancer, a contractor, or a combination of the two; you are responsible for finding work, keeping clients, and marketing yourself to ensure you can pay the bills and put food on the table. It's a juggling act, and unlike employees working for an employer, your financial future does include a level of risk.
However, there are steps you can take to reduce the risk of any financial problems down the line.
#1: Save into a pension
Being self-employed, you don't have the luxury of an employer's pension. However, all isn't lost, as there are still retirement plans open to you, including the option to defer some of your net earnings into a 401(k) plan. Check the linked article to find out more. You might also look for a private pension scheme, as this will give you another pot of money to dip into when you finally retire. Therefore, budget your finances each month, and if you can afford to pay extra into whatever retirement pot you have started, then do so.
#2: Open a savings account
In fact, open two savings accounts, one for your personal life and one for your business life, and look for something that offers the highest rate of interest, so you get more bang for your buck! We recommend using a high-yield savings account. With savings in place, you will have more money for your retirement; and should you suddenly need any money in an emergency situation, you will have funds at your disposal to reduce the chances of you getting into a potentially tricky financial situation in both the short and long-term.
#3: Ensure you're insured
For your personal life, consider looking into medical and home insurance if you are not already covered. There are also coverage options for your business. The types of coverage are wide and varied, but they include 'employer liability insurance' if you have employed people to work for you, 'professional liability insurance' to protect you against compensation claims from upset clients, 'income protection insurance' should you find yourself unable to work due to illness, and 'defense base act' insurance if you are working as a government contractor overseas. Research your insurance options online to find out more, as without the right coverage, your financial future might be in jeopardy.
You should also seek legal advice. Because in the event that your insurance company disputes your claims, you will have somebody on your side to help you win your Defense Base Act case, (for instance), and claim back any money owed to you.
#4: Hire an accountant
Working with an accountant is something that should be your priority as a self-employed person. A good accountant will help you budget for your business and give you guidance on filing your taxes and reducing your tax bills. Consider them your second eyes to help avoid financial mistakes that could jeopardize your future.
With all that said, it's difficult to predict what the future holds, especially when working for yourself, but you can take steps to protect your finances. Follow our tips, and if you have any other suggestions for our readers, we’d love to read them. Sharing is caring- leave a comment below with your suggestion so we can all learn!
About Money & Mimosas: Money & Mimosas was started as a passion project by Danetha, a former NFL cheerleader and CFO. After a brunch conversation with girlfriends, Danetha was inspired to launch a resource to learn how they could all enjoy life while being smart with their money. Because who doesn’t want to have their money and mimosas, too?