- Personal Finance
Finance Basics for the Self Employed
Being self employed is tricky.
One you are alone. I mean you work alone most of the time and also you are pretty much responsible for everything. Getting new business/clients, servicing them, raising bills, collecting payments etc.
This hub is to introduce the few things you should be looking out for in your financial area if you are self-employed
What is coming in
What is going out
The self-employed is responsible to himself first and you should be treating yourself as the first employee of the firm. You must pay all other bills after paying yourself. That is the way you need to look at this.
Be very careful about your credit score.
Ensure that you use your credit to the max (e.g. credit cards) and pay all outstandings before the due date.
Most cards give 50 days of free credit. Use it.
Keep Personal / Professional Expenses Separate
In the start I would spend and not remember what went where. As a self-employed person you can only deduct that expense that is made towards running the practice/work, you cannot include all your personal expenditure.
Hence, I suggest, within your wallet keep two different stacks. Spend from the personal one for personal use and from the professional one for professional use.
Paperwork / Accounting
Start keeping records.
start simple. A day book. what came in, what you spent on what.
if you like crank up an xl sheet or a simple free program, but you really dont need any complicated software until unless you are clearing a decent sum and have to keep a record of everything.
If you have more than 5 clients, I do suggest a software to keep a track of billing, invoices, taxes accrued etc.
Being self employed is difficult.
if you can streamline your finances, a lot of the headache and heartburn can be avoided!
All the best!