Protecting Your Finances When Self-Employed

When you start to work for yourself it can be a daunting and challenging time, however, in the long run, it can be worth it. To be successful as a self-employed person you need to make sure you are looking for areas such as your finances. If you don’t it could spell disaster and it could leave you with little or no money to even live. Often this can be the thing that causes self-employed people to go back to working for an employer.

Photo by Christin Hume on Unsplash

So, how can you protect your finances when you are self-employed? Let’s have a look at a few below: 

Set Up Payments 

When you are self-employed you are going to need to receive funds for your work. This means that you need to make sure you have a way to accept payments. Although some people with pay directly to your bank this is probably not the best way to run a small business or service. You need to think about using it. tools such as high-risk payment processing from HBMS.com, PayPal, and other payment methods. You should also set up your invoicing and the terms behind your invoice. For example, stating that they have 28 working days to pay an invoice or until a set date. This will help to protect you if it ever comes to chasing late or missed payments. 

Pay Yourself A Wage 

When you first start working on a self-employed basis it can be very easy to just have all the money to yourself and in your personal bank account. When you can, open a business bank account and then start paying yourself a wage. This way you have funds in your business to keep growing but you also have a steady wage that comes in each month. If you have a month where you don’t earn as much then after a while you should have enough money in your business account to make up for the shortfall. 

Plan For Taxes 

One of the worst things you can do when you are self-employed is to forget about your taxes. Instead, put some money away each month towards paying them at the end of the year. This way you won’t be searching for a lump sum of money or you won’t be left short at the end of the year because you’ve had to pay the bill. 

Create An Emergency Fund 

Just like what you would do when you are employed, you need to think about setting yourself up an emergency fund. Everyone should have one, regardless of if they work for themselves or are employed. You need to have enough in your emergency fund to be able to cover your basic living costs for between three to six months. If the worst was to happen you then have this time to try and rectify it.

These are just a few of the ways you can protect your finances when you are self-employed. Did you find them helpful? Please let us know in the comments.