Seven Tips for the Self Employed to Thrive Financially

January 22, 2021
Frederick W. Daily, J.D, LL. M (tax)
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Self-employment is an awesome and exciting journey. But just like any other good career path, it has its own share of challenges. One of the major challenges is financial like keeping mileage forms. Here are some tips to guide you through the financial difficulties.

Budget Appropriately for the Fluctuating Income

The money will trickle in different each month. You must be clever to manage your cash flow by prioritizing your bills. You will have to pay for the car loan before you pay for the entertainment expenses. Also, you should prepare for slow months and make clear what your expenses are as a person and as a business. During tax filing, things will be much easier.

Pay Tax Before Anything Else

You are not get a paycheck like employees who get their earnings with the tax already deducted. You will have to put aside your taxes on your own by making estimations of your taxes on a quarterly basis. Don’t be late in paying taxes because you will be penalized. If not sure of how much to set aside, use 30% of your quarterly tax allocation at it will work just fine.

Mileage Tracking

If you use your vehicle for business purposes like meeting clients, carrying supplies and moving between work premises you are entitled to tax deductions. Doing mileage tracking is overwhelming if you do it manually. The best way to go about it is using an app to automatically log the routes and assign accuracy purposes as justifications.

Save for Emergencies

Actually, everyone needs an emergency fund but it is more critical for a self-employed person. This will come in handy during low seasons and will fill the holes caused in your finances by unforseen expenses.

These funds should be able to cover your financial needs for about six months of bad business. Your mortgage and repairs will not wait for your business to recover so you need to save for emergencies.

Don’t Overspend When You Perform More Than Average

Just like low months, there are months that your business income will surpass the average. This is not the time to celebrate and host parties. It is fine to treat yourself but don’t go overboard. Set aside money for your taxes, emergencies, and wages and then save the rest for your financial security. Remember, most small companies fail due to cash flow issues, not profitability issues.

Think in Percentages Instead of Cash

Your income is not fixed and regular. There are months you will get a lot of cash while others will have small incomes. For you to save appropriately you will need to think of the percentages you need to save each month. This way you will save even when you earn little or more each month.

Factor in Retirement

When the business is still in its infant stages you might ignore your retirement but never forget it entirely. Although you want to have a sustainable business you need to factor in funds for retirement since you will not be doing this forever.

Self-employment is exciting, thrilling, and fulfilling at the same time. However, you will find it easier when you use a mileage app to maximize your mileage forms, submit your taxes on time and create funds for future difficulties.

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Frederick W. Daily, J.D, LL. M (tax)
Originally Published
April 11, 2018