Whether you’re running your own business or doing freelance jobs, being self-employed is very rewarding – flexible schedules, being able to work from home and you only have yourself to answer since you are your own boss.
However, self-employment isn’t just rainbows and butterflies. One of the downsides would be the lack of employer-paid benefits and an HR department to turn to when things get out of hand.
Managing your own finances is more critical when you become self-employed, especially for those who have irregular income.
To guide you to financial success, here are 3 important budgeting tips to remember when you are your own boss.
1. Estimate your monthly earnings.
It’s okay to predict your monthly earnings as long as you aren’t spending money before you actually receive it. Based on how much work you have lined up, you’ll be able to estimate your possible earnings for the month and from that, you can determine how much you can spend and save or where you can make cutbacks to stay within your budget.
2. Have a monthly spending plan.
Self-employed or not, we all need to follow a strict budget if we want to have our finances in control. Make a list of your actual living expenses, all the non-negotiable necessities you need to pay for each month. Having a vision of your necessary expenses will help you plan your spending and determine how much you need to earn each month.
3. Set money aside for taxes, retirement and emergency savings!
Just like working for an employer, a part of your income should go to your taxes, retirement and savings. Just because you work for yourself doesn’t mean you can spend all the money you receive when you get it. Well, sure, you can, but think about your future. Taxes will be your sole responsibility and as much as you enjoy your work, you’ll still want to retire eventually. It’s never too early to start saving for retirement. But most importantly, you need to prepare for the worst, like an unexpected setback that might leave you unable to work for a period of time. Having an “emergency savings” will help you keep your finances (business and personal) running and in control, no matter what happens.