When you have an irregular income, it can be difficult to manage your finances. If you are self-employed, the question now is: what steps should you take to guarantee that you will never be short of money?
Although being a freelancer has many advantages, including being your boss, having flexible working hours, and the freedom to select the job that you want to accomplish, it also comes with its own unique set of difficulties.
When you are self-employed, you do not receive the employee benefits that come with belonging to a company. Instead, you are responsible for your financial challenges, which may include taxes, unanticipated bills, and clients who are late with their payments, to mention a few.
You will, however, be able to get around the obstacle of inconsistent cash flow if you plan things out carefully. Christian Hugo, the Solution Strategist at FNB Integrated Advice, responds to our concerns about how to preserve monetary sustainability while simultaneously working as a freelancer and living the life of your dreams.
How Does Someone Who Lives on Their Own and Has an Unpredictable Income Manage Their Finances?
“Find the stability in your inconsistency—consistency in your spending,” the advice advised. You might be wondering how you manage to maintain consistency. You need to sit down and make a realistic budget, and then you must stick to it.
Putting down a detailed budget is going to be the most important thing you can do to assist you to manage your unpredictable income. Make use of the banking apps and online banking options that are at your disposal, such as the Smart Budget feature on the FNB app.
What Would a Suitable Strategy Look Like for Someone Self-employed?
You Should Begin With the Past Twelve Months
Find out how much money you need to make the absolute minimum throughout that period. Your mind will be put at ease once you realize that you are able to construct your budget with the goal of attempting to maintain your minimum required monthly revenue.
This will also enable you to not face financial strain for the next 12 months. When there are months in which you earn a higher income than you typically do, you should put aside some of that additional money in case of an emergency.
In order to make ends meet during financially challenging periods, some self-employed people resort to using credit cards or taking out loans. When it comes to loans and debts, what are some of the things you need to think about more carefully when you are self-employed?
It’s possible that you’ll need credit to keep your business going while you’re first getting started or when things get difficult, but you can’t use credit to pay for your lifestyle.
When it comes to your company, taking out a loan or using credit of any kind requires careful planning, both in terms of how you will pay back the loan or credit and how it will affect your overall budget. It is of the utmost importance that you adhere to your strategy since deviating from it could have devastating effects on your financial well-being in the future.
Is it wise to keep your bank accounts and your business bank accounts separate when working for yourself?
In an ideal world, yes; but, this does not always turn out to be the case. When it comes to planning, it is essential to keep your professional life and your private life completely separate from one another.
If you just have one bank account for both, you must be clear on which spending are for your business and which is for your personal life, and then you need to keep track of both sets of expenses. Consider opening many low-cost bank accounts so that you can manage your finances in a manner that is most convenient for you. This is one alternative.
If you do not receive a regular paycheck, how should you go about creating a budget?
When someone works full time, they have a pretty good sense of how much money they will make each month and can manage their finances accordingly. On the other hand, a freelancer is responsible for reviewing the preceding year’s worth of data.
As was said in Question 2, you should aim to base the creation of your budget on the very minimum of your monthly income. This will allow you to save more money in the event that you receive a larger-than-usual income. Make use of the more funds available during the prosperous months as a supplement during the less prosperous months.
As a freelancer, how should one plan a budget to account for taxes?
This is not going to be a simple undertaking, so getting some assistance from a professional is something you should give serious thought to. You can get a sense of where to begin by looking at the taxes from the previous year.
As soon as you have a clear understanding of that, you should immediately begin analyzing your revenue projections for the subsequent twelve months. This will aid to clear up any confusion regarding the potential tax burden for the following fiscal year. It is still in your best interest to seek the assistance of a professional, as doing so is likely to result in cost savings in the long term.
Are there any suggestions for changing not-so-great purchasing habits into healthy savings habits so that one can build up one’s funds?
To get started, you need to have a crystal clear grasp of your objectives and the things that are important to you. Once you have this information, you will be able to begin adjusting your spending to better reflect your goals and values.
You need to keep in mind that creating your own business will need self-discipline and sacrifice on your part. However, you must first make a plan and establish a budget. This will enable you to have a clear understanding of what it is that you will be sacrificing in order to help you reach your goals and minimize the amount of financial stress you are under.
When it comes to the management of their finances, what are among the most frequent errors that freelancers make?
- Combining the financial matters of their company and their affairs.
- If you haven’t done any planning, you should know what your potential income and expenses will be in the future.
- Having a solid understanding of taxes and their repercussions. Obtaining the assistance of a trained specialist might be the answer.
- Giving up insurance coverage in exchange for a gain in the short term
- They are selling themselves short.
In terms of Their Own Personal Finances, What is the Most Important Objective That Freelancers Should Seek to Achieve?
The skill of living within one’s financial means
Spending less money than you bring in should be the primary focus of your efforts. Your next major objective should be to strengthen your ability to weather any kind of financial storm, both in your private life and in the operations of your company.
What do you consider to be the most important financial management strategies for freelancers to follow?
- Planning, planning, planning.
- Instead of using credit to fund your lifestyle, focus on growing your business with the help of the correct credit.
- Be transparent about your monthly spending, and commit to staying within that budget.
- Putting money aside for unexpected costs and your retirement should be included in your monthly budget.
- Discuss any concerns you have regarding insurance, taxes, or business planning with a trained specialist.
- However, the most essential piece of advice is to be aware of your value.