Posted On: August 8, 2018 by Exchange Bank of Northeast Missouri in: Budgeting General Personal Finances Save Money Savings
If you’re similar to 10 percent of the active American workforce, you are self-employed. Those who enjoy going into business for themselves find a great degree of freedom and empowerment. You have more value for your work, no uniforms, get to choose your customers, not to mention unlimited vacation days. However, these benefits can be quickly overshadowed by the effects of poor money management. In order to make your dream successful, there are certain key habits and skills you should have or develop in order to help your business thrive.
Organization
You may have already thought about the most exciting aspects of your new business such as the products you are selling and your logos. However, in order to keep the things you are passionate about alive, you need to keep your finances highly organized.
Taxes - Many self-employed people forget about Uncle Sam until they are hit with a shocking letter. Unlike the days when your employer would automatically deduct taxes from your paycheck, you will need to do this all yourself. This should take priority over everything else because the costs of not doing so can shut you down. Keep in mind that you may need to pay an additional 15 percent self-employment tax in addition to your regular income taxes.
Budget - In addition to a personal budget, you need to create a business budget to allocate expenses like postage, childcare or insurance. Calculate the basics that you will need to make ends meet. Decide what salary you are going to pay yourself every month. These are the items that many forget about that could cause your business to fail. Decide what percentage you are going to spend on what categories each month and stick to them.
Tracking Expenses - It may be easy to dismiss a small business lunch here and there, but not having a system of tracking can severely disrupt your budget.
Open Separate Accounts - We can’t stress the importance of this enough! The secret to staying organized and on track is having your business accounts separate from your personal accounts. You can create an account where you deposit a percentage of your income just for taxes so you never have to sweat when the quarterly taxes are due. Come see us at Exchange Bank of Northeast Missouri to look at our business account options.
Plan Ahead
While there are many items to stay on top of for your business, you shouldn’t neglect your own goals for the future such as retirement or emergency savings. While it may be great being your own boss, you no longer have the matching 401k contributions that many employees receive as a benefit. This means you will have to make it even more of a priority to save for your post-work life.
Self-Control
There may be some months where you make double or even triple the amount of profit you had estimated. When this happens, take out the same amount that you always do towards the items in your budget and anything extra put into the Emergency Fund. We recommend doing this in percentages, so no matter if you make a lot or a little you are still funneling money into every priority you have.
On months when you don’t make as much money or even if you make no revenue, you’ll be thankful that you saved your profits from the high income months. Eventually, you should get to the point where you can go 3-6 months without a salary because you have built up a significant savings. This takes diligence and self-control. It takes doing the little things right, every month.
Adopting these key habits into your business plan is going to set you up for success so you can focus and enjoy the fruits of your labor.
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