Do you want to become your own boss or wana be Self-Employed? Freelancing is a growing landscape, with over 57 million Americans joining the industry. Experts estimate that freelancing will soon make up the majority of the workforce. If you think freelancing is the right career for you, you’re in for an exciting experience. However, if you’re opening a business for the first time, you may have trouble managing your income. Studies show that 82% of small businesses fail due to poor money management. If you want to ensure your business’ success, we got you!
This article covers six money management tips for small businesses. Read on to discover how to manage money for self-employed individuals.
Table of Contents
1. Start With a Budget Plan
Every business endeavor starts with a solid budget plan. Before making a financial decision, look back at your budget. It’s good practice to create a new budget every month. Start by identifying what baseline expenses you need to pay and work around them. List down the basic necessities like rent, utilities, and food.
2. Set Aside an Emergency Fund
Emergencies can happen at any time. Having an emergency fund gives you something to fall back on if you’re stuck between projects and a financial wall. If you’re a freelancer with varying monthly incomes, aim to cover at least twelve months.
3. Separate Your Business and Personal Accounts
If you’re a self-employed individual, it’s crucial to separate your bank accounts. You may need to create a new business bank account and get a new credit card. If you use money management apps, you may also select a different app for business expenses. Tracking your expenses becomes more manageable this way. This ensures that you don’t mix up personal expenses while balancing books.
4. Pay Yourself First
Setting a salary for yourself gives you more control over your business’s finances. It can be tempting to keep all the money for yourself. However, this can hurt your business in the long run. Consider using a paystub maker for self-employed individuals to track your salary. It’s best to leave a bigger sum in your business accounts, especially if you’re a startup business. As your brand grows and cashflow becomes more stable, you can give yourself a higher salary.
5. Always Pay Your Debts
Some people may decide to put off their debts when their monthly income is unstable. A newly self-employed individual may wait to grow their business first before paying their dues. However, it’s crucial to continue paying your debts. Doing so will boost your credit score and decrease interest payments. Even if it seems like you have more pressing priorities, paying your debts is more practical.
6. Save For Retirement
Even if you have no plans to retire soon, it’s best to start saving today. Consider setting automatic transfers between your checking account and retirement account. Ensure that you have enough money to make the transfer and allow your savings account to grow.
Use These Money Management Tips Today
Money management is a crucial process that freelancers must deal with on their own. Learning how to manage your money will help you become a more effective entrepreneur. If it’s your first time running a business, check out our other blog posts for more tips for building your brand.