Freelancing or being self-employed might seem daunting to most of us but it undeniably has its own perks. Apart from being your own boss, self-employment paves way to choose your own working hours, deciding how much you would charge to impart your service and more importantly to do what you want, when you want and wherever you want. It delivers a certain ambiguity to your work, opportunity and experience.

Unfortunately our educational system does not pay enough emphasis to the importance of personal finance and money management. Being self-employed opens up a plethora of avenues to venture into; Needless to say that it’s no different from the hustle of a traditional 9 to 5 job if not more. When one chooses passive income over steady monthly income, the grind to handle cash becomes pivotal. 

When we compare being self-employed to a more traditional form of employment, we know that it provides minimized financial benefits. You wouldn’t be entitled to a lot of amenities provided by a firm when you are employed under them, like healthcare, holidays and sick pays. This calls for a strict foolproof financial plan for resources and income.

Here are 5 financial management tips for the self-employed:

• Setting up financial goals

Setting up goals or objectives for your finances gives a certain direction to your plan. The path that the goals create is for you to get a clear cut idea of what you would want and need in the future. Your goals can either be short term for the near future or long term, for the years to come.

Another benefit of setting up goals is you in turn set up a timeline for yourself, you know what to expect with a certain influx of income.

• Savings are important

This is the epitome of money management irrespective of the nature of your employment. This is not just for future proofing but also to have financial security. Now, in the times of Covid-19 we know that anything can happen at any given time. Predicting a medical emergency is close to impossible for a layman. The safest way to tackle it is by anticipating such emergencies and having contingencies built for them.

Saving has to be done with keeping 2 things in your mind, your current needs and retirement. Experts have come up with the golden rule of 50-30-20. This means that 50% for your income is for your needs, 30% is for your wants and 20% directly goes to your savings. Now there are ample ways to do that but the underlying fact remains that savings are very important for financial progress.

• Plan A Comprehensive and Realistic Budget

Crunching and trimming costs is the way to go when you plan for a certain tomorrow. Like setting up your financial goals, this too must be realistic and easy to stick with. Figure out how much money you make in a given time space, consider all sources, bonuses, high and low income periods. Compare this to your expenses- to make sure that you have enough money to handle them. This will give you an idea of where you tend to spend that extra buck. Regular review to the budget is as important as making one.

• Debt Management

The safest and hassle free way to live life would be without having debts but in today’s day and age it isn’t the case. Most of us have hefty student loans and other sort of micro and macro debts. The golden rule here would be to clear them off as soon as possible. The moment you receive your income, make it a priority to pay off all your dues. This will make sure that your debt doesn’t multiply with penalties.

• Understanding Taxes 

This cannot be emphasized further. Taxes are very important in financial management. When you’re self-employed, you do not have a constant base salary. You do get a number of tax breaks, like claiming your expenses against your income to reduce your tax. There are plenty of online calculators which can do the tax calculations for you. These calculators take into account your gross pay and deduct the taxable portion, showing how much you will be left with. The objective is to not pay more tax than you have to.

One might also venture into investments, but this should only be done after seeking advice from trained professionals. All in all, these 5 tips have unmatched benefits for self-employed professionals. The bottom line being that the more structured and prepared you are about your income the better you tend to handle it.