10 Jan 4 Financial Planning Tips for the Self-Employed
You’ve finally acquired your dream job, working for the best boss—yourself. The only problem is you don’t have your own finance department. However, doing your own books might be simpler than you think. You just need to keep a few things in mind.
In many ways, financial planning for your home business is much like your home finances. One of these ways is planning ahead by saving. You probably realize that your income will ebb and flow, either seasonally or erratically. In either case, you will need to be able to finance your operations throughout the year. When times are good, be prepared to put aside enough to keep operations going during the down times.
If you’re just getting started, there’s nothing wrong with putting aside a minimal amount, either by percentage or in a fixed dollar amount, but make it your goal to eventually be able to put aside whatever it will take to keep business afloat for six months. Make it automatic by having a small amount of money moved from your operating account to your saving account every month.
Keep a Budget
How do you know how much you need to put aside? That’s where the planning comes in. Your best bet to maintain sanity in this area is to purchase budgeting software. No need to reinvent the wheel, when the computer can do so much of the work for you. It should also guide you through expense categories you may not have thought of.
Other software can also ease much of your other your financial work, such as expense trackers, invoicing apps and payment processors.
Pay Your Taxes
No one likes to think about trivial details such as paying the government. But paying taxes on time definitely beats paying fines after an audit. Because you aren’t getting a paycheck with taxes automatically withheld, it’s time to start thinking about how much you need to be ready to pay. Taxes should be a part of your budget, and you should prepare year-round by putting aside 25-30% each pay period. Although that amount might wind up being more than you actually owe when you file, the extra can always be stashed into savings or retirement.
Using this form from the IRS can be a helpful guide to determine how much you will owe each April. This tax season is almost over, but it’s never too soon to start thinking about next year. Taxes can be much less daunting when you take advantage of the many deductions you will qualify for, such as those you find here.
Prepare for Retirement
What about the time when business slows down for good? Putting aside in your budget a little of your profit (or a lot!) each quarter will ensure fewer worries down the road when either your business has run its course, or you have.
Looking at the above ideas for money management in your business might spell out one thing for you—restraint. Although it seems you are putting aside much of your income, doing it right will ensure that it will come back to you in the end. We’re always here to help you keep your business going by working on your finances with you so you can keep your mind on your company.