Managing Your Money When You Are Self-Employed!

Everyone makes out that being self-employed is a absolute walk in the park and it is, until it comes down to the numbers. If you’re like me and hate maths, then it becomes the job you dislike the most. In my first month the idea of buying stationery to put all my accountancy work in was a great idea, but 6 months down the line and I’ve learnt a few things!

Managing Your Money When You Are Self-Employed. career blog freelance life Lisa Scott the beauty type

So follow my guide to how to manage your money when you go self-employed or even when you’re full time working but just pants with money management!

Create a separate account for tax!

This is a big one, but as you are your own payroll administrator you need to save at least a third for tax. In theory even if you work full time and earn money from your blog, you should still declare that to the tax man. I know, it sucks! The general rule of thumb is to save a third of your income for the tax man. This should cover your income tax, national insurance and student loan contributions. If you end up saving too much, result – go on holiday. If you don’t save enough, you’ll have a massive bill to cover! Eek! I know a third sounds a lot but think about what you used to never see from a payslip!

Learn what you need to live off.

So many people think they need X amount and that’s it. However, there’s living expenses like rent, mortgage, bills, car payments and then theres the extras. We can all deny it but we all spend our disposable income on unnecessary Tesco shops, a ASOS haul and a trip to the cinema. These things do add up and although we can try and pretend we can live without them, truth is, you probably can’t. When creating your rates and managing what money you will be saving for tax, understand what you need for a realistic income. No shame it being a large number, just understand how to manage it.

Establish boundaries with your cash flow.

If you invoice a client, make sure you specify when you require payment by. I’ve been stung when I said 28 working days not just 28 days. It was two bank holidays which dragged it out even further. Know when to expect payment. If you start putting yourself short you could easily need a small payday loans online to tie you over. Once you get into the rhythm you’ll know what to expect.

Set up items like a mortgage, loans, finance and heavy bills before you go self-employed.

A lot of companies such as banks and lending providers may not give you good decisions if they think you haven’t got enough financial stability behind you. For example, getting a mortgage as a self-employed person can be trickier than if you’re full time employed. Luckily I got mine when I was full time employed but you need at least a year behind you to get through the checks process. Although you can’t always judge the timings of these things, maybe have a look at your five year plan to assess when things are right for you and your situation.

Invoice weekly and keep track of your money!

Make sure you note down when you’ve done work, how much and how long for and when you need to invoice. It’s easy to do work, forget you’ve done it and forget to invoice! Once you have invoiced, note down in an excel sheet what number it is and how much for and then keep a total running so you know when you received payment and how much you’ve learnt so far. Numbers will keep you positive as well as an idea on tax etc!

Do these tips help you understand how to manage your money as a self-employed worker? If you have any other questions, let me know and I’ll be happy to help or cover it in a blog post!