Money-saving Tips for the Self-employed

Gone are the days when the American dream means climbing the corporate ladder. Over the last years, the mindset of the American worker has shifted to valuing flexibility and freedom over stability. Self-employment continues to be a rising trend as employees leave their day jobs to do freelance work or start their own business.

One of the major challenges self-employed individuals face is managing cash flow. Since you do not have the regular pay that a day job provides, not to mention health insurance and tax duties, it can be challenging when all these things fall on your shoulders. Saving and budgeting can be taxing, too, as there will be months when you’ll be flushed with cash, while there will be months when you’ll need to tighten your belt a little.

Below are a few money-saving tips for the self-employed.

Set a budget.  Whether you are a business owner or a freelancer, this is very crucial. Good financial planning can determine the success of your new venture. Total all your income sources. Make sure to list down all your expenses every month. Determine all the fixed costs such as monthly bills, subscriptions, and mortgage, which takes up a huge part of your budget. You may want to consider paying off your mortgage early to get it out of the way and have more room in your budget for other things like savings and retirement fund.  After listing down the fixed costs, add the variable expenses such as payment to freelancers if you hire some, and any other expense that vary month-to-month. By doing this, you’ll know the amount of cash you need every month to live comfortably. Stick to the budget as much as you can. There are plenty of budgeting apps and tools that can assist you with this.

Set your rate. Do not undersell yourself and do not be shy to increase your rates as you gain more experience. In terms of billing, it’s better to be billed in installments rather than in lump sum at the end of a project. It would be harder to budget your money if your cash comes in once every three months rather than having them sent in monthly installments.

Build your emergency fund. And maintain it. It is important to always save for the rainy days. An emergency fund can save you from high-interest debts in times of financial stress. Make sure you have a fund, ideally a 6-month cushion – for when something unexpected happens such as a big client backing out. This 6-month cushion cannot be built right away, but you must work towards building it as soon as you begin getting paid. Set a certain percentage of your income to be allotted to this fund every month.

Know your taxes. Now that you are self-employed, you no longer have your HR department’s compensation and benefits people to look after your taxes. You must do them yourself now. Be aware of the tax bracket you are in now that you have gone solo. If you are a business owner, seek the help of a financial advisor in determining the best entity type to register your business as.

Get help. Time is money. If you think it would be best to delegate some of your tasks to freelancers in order for you to focus on more crucial tasks, hiring help could be a great idea.

This article was originally published by Uncapped Mortgage

Post to Twitter

How to Save Money Each Month While Paying Off Debt

You have oodles of debt that you want gone. But you also have other important financial goals, like saving money, that need your attention. These competing priorities can make you feel like you’re trapped in a chicken or the egg conundrum. If you pay down your credit card debt, you’ll have more wiggle room in your budget and can save that extra cash. But, if you save more money, you won’t have to whip out your credit card next time an unplanned expense pops up. So do you pay off debt or save? The short answer is: porque no los dos?

Here’s your plan of attack to slay debt and pad your bank account:

Divide and Conquer

To work on both goals simultaneously, you’ll have to split your available resources between them. But, you need a clear plan to ensure that you allocate your dollars in the most effective way.

To get started, prioritize your debts and savings goals, keeping these things in mind:

  • High-interest debt will sink you. If you only make the minimum payments on your credit cards, you’ll be in the hole for years and pay potentially thousands extra in interest. Get rid of this debt first.
  • Lower interest debt isn’t as urgent. While you definitely want to pay off all of your obligations, “good” debt like student loans and your mortgage do less damage to your financial health.
  • Paying extra on installment loans doesn’t help your budget now. If you sock extra cash at your mortgage or student loans, you’ll reduce the total time you’re paying on them. But — it doesn’t change your required monthly payment amount.
  • An emergency fund will save you in a pinch. A cash reserve will keep you from going further in the hole when something breaks or you lose your job.
  • Start saving for time-sensitive goals ASAP. The holidays, your sister’s destination wedding, and your car registration renewal are all known events. Squirrel away a little bit here and there in the months leading up, and you’ll pay for them in cash with ease.
  • Don’t ignore retirement. It may seem like a million years away, but delaying saving for retirement will have long term negative effects. You’ll miss out on the compounding interest that actually works in your favor. If you can afford it, contribute at least enough to your retirement account to get your employer’s full match.

Choose the Right Mix

Once you’ve got your priorities in order, you need to divvy up your funds in a way that makes the most sense for you. For example, from your discretionary income, you could put 6% into retirement, 50% toward your credit card debt, and 44% toward your savings goals. As you pay off debt and your goals are completed or change, be sure to adjust your mix accordingly.

Remember: While there are some good guiding rules of thumb, how you manage your money is up to you. Personal finance is personal!

Find the Dollars

To make faster progress toward your financial goals, try freeing up more of your existing resources, increasing your cash flow, or both. Here are some steps you can take today:

  • Review your spending. Is there anything you can scale back on or nix?
  • Negotiate your bills. You may be able to get a lower rate on things like car insurance or cell phone service just by calling your provider.
  • Buy smarter. It doesn’t matter if you’re getting groceriesclothing, or shopping online, there are countless ways to get what you need and come in under budget.
  • Earn more dough. Consider picking up extra shifts at work, getting a second job, taking on freelance clients, or selling some of your unwanted stuff.

Remember: While it’s tempting, be sure to use your budget wins and side income for your debt pay off and savings goals, not for brunch and a new pair of shoes.

Final Thoughts

It can be overwhelming to juggle multiple, seemingly-competing financial goals. But if you proactively map out what you need your money to do, you can strike a balance that allows you to live your best life.

This article was originally published at HiCharlie.com

Post to Twitter