For a person who has to deal with an annoying boss, transport problems and other major problems of a workplace, the thought of being self-employed simply seems like a dream come true. Being self-employed gives you a sense of autonomy and freedom which drives more and more young professionals to try their luck in being self-employed. But just as every role comes with a new responsibility, here too you have to be ready to navigate through unsteady waters and always remain watchful enough to ensure that your personal finances are under control.
Are you someone who is self-employed and you’re looking for the budgeting strategies that you should follow? If answered yes, here is how you should follow a budget.
- Keep a close tab on your monthly expenses: The foremost step that you need to take is to compute your financial baseline which is all your basic requirements without the requirement of any frills. Jot down every single vital expense and exclude all extras like TV plan, premium cable connection and other magazine subscription. Cut down excess spending as being self-employed comes with an added burden of saving more than spending.
- Categories of budget should be taken as percentage: As you’re a self-employed, there will be a difference from the conventional method. You can get a big check one day and again not receive any check for the coming few weeks. With this kind of income, you have to calculate in percentages. Taxes should take 20%, expenses and groceries 45%, retirement expenses 20%, travel 5% and donations 10%. When you’re starting out, you may not have too many savings, but later on you can get on the right track.
- Become organized: This is one of the most vital steps. You often make the mistake of depositing all the income that you get from the clients into your business account but this is indeed a wrong approach. When it’s time to report your income as against the expenses at the end of the year, it will become much tougher for you. Hence, you should maintain a different business account and start paying yourself from it. You may even have more than one personal account to maintain.
- Gather all payments which you receive: This is where you can create a little bit of magic. Each time you get paid from a client, gather the money following the percentage which you made. In case you’re a professional photographer and you get $2000 for a birthday shoot. As soon as you receive the funds, it should reach your business account. That is the only way in which you can devote money to every category that you’ve created in your budget.
Therefore, irrespective of whether you’re a self-employed person or you’re working with some organization, following a budget is a pre-requisite. Follow the personal finance steps mentioned above to reach your personal financial goals and help yourself become a successful self-employed individual.