There are many reasons to become self-employed, and a lot of people are choosing to take this route. You’ll have more freedom and, therefore, you can have a better work-life balance, for example. As well as this, you’ll feel the satisfaction of creating a business and seeing it thrive.
There are also challenges when you are self-employed. You don’t have the luxury of a regular income, you won’t get paid if you are sick, and you also have to handle all your finances carefully. This last point is crucial to get right, and if you’re unsure of what to do, keep reading to find out more.
Speak to Experts
If you’ve never run a business before or you’re not great with money, it’s worthwhile speaking to experts about what you can do. If you talk to creative private lenders, for example, you might discover that one great way to protect your profits is to invest them in property. Or, you might speak to a financial advisor who can help you make a budget (which we’ll discuss more later).
Speaking to experts and getting advice is not a sign of weakness, and if you are a business owner who isn’t sure about something, it’s the ideal thing to do. You’ll learn useful lessons that you can put into practice right away, which will improve your business immediately.
Have Separate Bank Accounts
If you only have one bank account for your business and your personal money, things can get very complicated very quickly. If all the money your business earns goes into the account you use for your grocery shopping or your mortgage or anything else you might have to spend out on, keeping track of your profits will be difficult, and it might be that you spend money that should be re-invested into the business or used to pay suppliers, for example.
This is why it’s far better to have separate bank accounts. Have a business bank account where all your business income goes and from where you pay your business bills. At the end of each month, pay a fixed amount into your personal account, and that’s your monthly income. In this way, it’s like you’re getting paid by an employer, and you can keep your business income safe.
Stick to a Budget
Managing your finances when you’re self-employed is not always easy. It’s going to be tempting to use more money when you want it just because you know it’s there, even though it would be better to stick to the monthly allowance you give yourself.
This is why it’s important to create a budget and then stick to it. The budget has to include all the necessary expenses, like your rent or mortgage, food, utilities, and any debt payments. When you know what this amount is, add a little more for entertainment and fun (as this is a big part of running a business – you need to find time for self-care), and then don’t spend any more than you have. In this way, your business profits can build up and be used within your business where they belong.