More often than not most financial self-help articles are written keeping the salaried individuals in mind. Unfortunately, self-employed folk tend to get left behind. How unfair! This article is aimed at helping self-employed individuals, who need some hand holding, with their management of money.
In all fairness, this task is mighty difficult for the self-employed since they don’t have regular income flowing in. Windfalls can be followed by days of desolation. Hence, budgeting become harder for this section of individuals. It is for this very reason that they must budget well.
Here are a few steps self-employed individuals can take to go about it.
Hold Your Horses
It’s quite possible that due to the nature of your job, you receive lump sum amounts rather than a regular trickle of money. Having wads of money at your disposal can awaken the spendthrift in you. It could fool you into thinking that you can spend more than you can afford. After all, there will be many more windfalls eventually. Unfortunately, they just aren’t very regular.
So, when you receive what’s due to you, your first priority must be saving a portion of it. You must be prepared for the future and be well-stocked for those proverbial rainy days. Unlike a salaried employee, if you feel the need to borrow funds you will be required to furnish substantially more documentation to get a Loan. So, be mindful. We do not suggest that you curb your spending completely. But, keep a good sum aside for investment and saving purposes. This will tide you over in difficult times. Given that you might need cash in the short term for business purposes, you could consider parking some of your money in Liquid Mutual Funds. They will give you better returns than both your current and Savings Accounts. And, of course, you can withdraw your money at any time.
Additional Reading: How To Meet Your Goals With Mutual Funds
Know Your Household Budget
You may not be earning your living in fixed sums, but your household budget definitely stays within a certain range. Use your household expenditure figures to determine the minimum amount you need to spend in a month. You can then add some money to this amount for recreational purposes. Use this combined figure as a yard stick to determine how much you should save when the next influx of money comes through. First keep the savings aside and then look at expenditure, rather than going the other way round.
Additional Reading: Financial Planning Ideas To Make Your Money Grow
In spite of all the budgeting, people tend to spend more because they stock their wallet with more than they need. Availability of ready cash prods the spender in us all. Even Credit and Debit Cards, with their ease of usage, urge us to spend more. But, don’t give in to these temptations. Stay true to your budget. One way to go about this is to withdraw only a week’s or a month’s worth of expenditure money and stick to it. Don’t keep wads of money hidden under your clothes. It will eventually vanish without a trace due to excessive spending. If you keep little, you will spend little.
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Make A Hit List
Actually, make two hit lists. One of all your debts and another of your financial goals. Follow this list when allocating money to different sections. First focus on paying off all your mounting debts, and then gradually build your savings pool. This does not mean that you should only focus on one thing at a time. Funnel more money towards debt clearance, and then divert some into savings. As your debts start to settle, funnel more money towards Investments and savings, and fewer towards debt clearance. Strike a balance.
Additional Reading: Top 5 Savings Accounts For 2016
As a self-employed person, who is used to dealing with far more complicated tasks, these 4 simple steps should be fairly easy for you to implement. Just remember to save a chunk from your next largess before you go about spending it.