I learned a lot about what went into a business, mistakes that business owners made, and a lot about business finances.
I’ve personally seen businesses succeed and fail, and I’ve seen businesses make plenty of finance mistakes that still make me shake my head. I think my day job really helped make the transition to self-employment much easier.
Here are my financial tips for the self-employed:
Keep your business and personal accounts separate.
The other day, I almost bought a personal item on my business PayPal. Even though it was something small, I simply don’t want the finances mixed and then be confused later. I’d rather just completely keep them separate so that I don’t have to go through each and every transaction later and wonder if they are a personal or business expense.
Also, if you go through your transactions a year later (such as when you are doing taxes), it can be pretty hard to remember what is what.
Keep your receipts.
When you are doing your taxes at the end of the year, you will have want to keep your receipts. You can of course file them physically into a folder, but these days there are many apps and software out there where you can just scan your receipt.
Set aside enough for taxes.
Everyone doesn’t pay the same amount in taxes, so it’s hard to say exactly what you will have to pay. Many different things can affect how much you owe. Whatever you think that you may owe, make sure that it’s enough and you should be paying your taxes quarterly if you are supposed to.
If you don’t know what you’re doing with your taxes, then you should probably hire an accountant, and possibly even a lawyer. Yes, a lawyer too. Lawyers can help with many business ownership gifting or sales, and there are tax lawyers out there that can help as well. Your accountant can probably help you determine if you need a lawyer in some cases.
Save for retirement.
When you work for someone else, sometimes it’s a little easier to save for retirement. Your boss may provide a company match, and there may be some other retirement plans offered through your company. However, when you become self-employed, everything is up to you. Make sure you are still saving for retirement.
Have an emergency fund.
I’ve said this plenty of times. Make sure you have an emergency fund! As a self-employed person, you may have a bad month, and a well-funded emergency fund will help you worry a little less.
What financial advice would you give to the newly self-employed?