Being your own boss is a dream that many an overworked employee would love to fulfill. No only do you take home all of the money at the end of the wor…
Being your own boss is a dream that many an overworked employee would love to fulfill. No only do you take home all of the money at the end of the working day, but you also find yourself in complete control and with a far greater level of flexibility.
But there are potential pitfalls too, perhaps most prominently the fact that the lack of pressure coming from above could cause you to gradually lose motivation or take your foot off the gas a bit too much.
Personal finance is another area that can become something of a headache for some. Managing your bank account is quite a simple and consistent process when you have a fixed wage entering your account every month, but being self-employed can cause this to become much more sporadic.
Don't come unstuck with taxes
Becoming self-employed can often be seen as a way of coming away with more cash in exchange for taking on greater responsibility. But in essence, you might still be carrying out the exact same tasks as part of your daily working routine.
A huge difference is the fact that you may have to be a lot more mindful about making declarations to HMRC. Anyone who runs their own small business must ensure their personal finance and business finance are kept separate, meaning they can be assessed on their individual circumstances.
This will give people the best chance of having the correct amount deducted and avoiding any underpayments that could lead to a hefty bill appearing further down the line.
Itemise your accounts
For people who are self-employed, the key to having a secure financial life is all in the detail. This could go as far as splitting every single outgoing you have into a category of personal or business. When you are scratching your head trying to work out whether the pint of milk you bought on the way to work should come under petty cash or not, this could start to feel like a bit of an effort, but take our word for it, it will all be worth it in the end.
The upshot will be that once this is done, you are able to place as accurate as possible a valuation on your business and monitor the disposable income that you have to spend when you are out of the office – a function that is essential for anyone trying to balance being self-employed with family, especially those with young children.
Be prepared for emergencies.
The issue with a monthly wage that is variable is that times of financial peril can arise very suddenly if you do not have a contingency in place to take the strain.
Keeping a bit of cash in reserve – no matter how little, as it's all relative – is essential to give yourself that cushion. Additionally, there are numerous insurance policies that can give you the peace of mind you need, but if you are unsure, turn to the experts.
If you feel like your debts are out of control and urgent action needs to be taken, do not hesitate to call us on 0800 019 2095.