BUSINESS

Top 8 Budgeting Habits to Help Solopreneurs

Top 8 Budgeting Habits to Help Solopreneurs

The allure of entrepreneurship is often too appealing. The freedom to work from anywhere, and to make more money compared to when employed is quite reassuring. However, what they don’t tell you is that entrepreneurship is leaving your eight-hour workday to come and work sixteen hours for yourself.

With such a schedule, maybe your business could be running on autopilot without any long-term plan documented. Besides, some solopreneurs haven’t learned about budgeting yet – they are trying to figure it out (budgeting is no fun either). Nevertheless, you should know you are not alone.

According to a survey conducted by the clutch in 2018, more than 60% of small businesses reported not having any form of a documented budget. Unfortunately, because most solopreneurs see a budget as tying them to a rigid structure, even though budgets help them to focus. This article outlines eight budgeting habits that every solopreneur should embrace:

Separate the business from your personal life

If your business expenses and your expenses mix in the day to day running of the business, then brace for some major headache. Besides, how will you get an accurate estimate of how much revenue your business ropes in? Or how much operating expense your business needs to survive?

If you haven’t set up an LLC or you are on the process, ensure to set up a checking account. Such an account for your business changes your mindset, and you get to know where to draw the line. Don’t mix business with pleasure. If you chip in any personal money for business expenses, ensure to reimburse yourself the same.

Similarly, don’t use your business account for personal purchases. This will make calculating your business profitability, taxes due as well as running expenses a lot easier.

Get insurance

Many solopreneurs may feel this is an expense they can delay when the business is in its growth stage. However, as a solopreneur, the purpose of insurance is to cushion the company against the unexpected. Get a business insurance policy will suit your business need.

For instance, if you are a locksmith, you can’t operate without a license and insurance that bonds you. Plus, when clients know that you are bonded, they are more likely to open their homes for you. Apart from business insurance, it would be best if you also had personal protection, such as health. In case of any medical emergency, you won’t have to dig out your business savings and deny your business much needed operating cashflow.

Keep all receipts

You might focus on the significant expenses and forget the tiny ones – that’s a mistake. Small costs when bundles up over time accrue to an enormous amount. That why it’s crucial to track every expense and factor in the same when budgeting.

Therefore, for any future successful budgeting, ensure that you are meticulous in recording all expenses. Always ensure to get a receipt. Plus, tracking your expenses will also give you an insight into where you are dumping money that could be used in running another aspect of the business.

Have a miscellaneous or sinking fund

Set aside funds for training, conference fees as well as unexpected business costs. The markets are never stable, and prices from your vendors or suppliers can fluctuate, you should always be prepared for such expenses.

Also, just like with personal finance, the strength of a business is in its liquidity. Therefore, ensure that you are working towards building an emergency fund and six months operating expenses as a measure to brace for tough times ahead. There is an infinite amount of problems that face entrepreneurs, and the future is never guaranteed. Embrace preparedness for business survival.

Set aside funds for taxes

As an entrepreneur, it may come out as obvious that you need to pay Caesar what is due to Caesar. You can either make quarterly or monthly payments of your taxes. As soon as you receive funds from clients, try to set up a tax account to deposit 20% of the sum received. Then, you can send the same to the IRS, but first, always consult a tax professional before sending any taxes to the Revenue collection agency.

In addition to taxes as a solopreneur, you must pay a self-employment tax that equates to 15.3 percent of your income. The self-employment tax includes social security and Medicare. Also, it would help if you took advantage of tax write-offs. There are several tax write-offs, and consulting a tax expert would be ideal.

Anyways, here are some examples; if you work in a home office, you can write off a portion of your bills associated with your home and treat it as a business-related expense. Phone calls, meals and entertainment, local travel, software usage, and education, among others, qualify for a tax write off.

Utilize automation and outsourcing

When hiring, consider freelancers over full-time employees. Why? As a growing business, you will save on payroll fees, taxes, training, and the cost of hiring. In the absence of people helping you to run your business, consider hiring from the freelance market place. You can get a virtual assist or a competent CPA and negotiate a good deal.

You can automate your social media handling by getting tools that automate posting to all social media platforms. If it’s marketing, get the software to automate your email marketing as well as CRM. There are several in the market, and some even allow you to plan your day and manage or collaborate tasks with freelancers.

Save for retirement

Despite all the expenses eating away at your business fund, you should still put money aside for retirement. There are retirement plans bespoke for solopreneurs with no employees, which includes the SEP IRA and the Solo 401(k). For instance, the solo 401(k) allows you money to grow at a compounded interest, and interestingly tax-deferred. Also, you contribute as both the employer and the employees, therefore allowing you to save more compared to other retirement plans.

Use budgeting software

With the right software or app, you can be able to track expenses, budget for the same, and even invoice clients. Especially if you are impatient and don’t want to look up what expenses you wrote down. QuickBooks, FreshBooks, and even Xero are examples of the latest software and apps that can assist solopreneurs. Such software, track, monitor, and help analyze your business spending habits.

Wrap Up

Even the very best ask for help. No entrepreneur has a monopoly on knowledge. It’s essential to reach out to the local business association and ask for help if you want to improve a concept about running your business. Above all, if you cultivate the listed budgeting habits, your future as a solopreneur will be full of the right choices.

Next article 3 Easy Ways to Save on Travel
Previous article 6 Simple Budgeting Mindsets That Sets You To Success

Related posts

0 Comments

No Comments Yet!

You can be first to comment this post!

Leave a Comment