Maintaining financial security is something that all people should strive for, however very few of us actually have it. According to recent statistics, only about 28% of Americans are financially healthy. It is crucial that you have money in both your checking and savings accounts, are planning for retirement, and have money set aside in case of an emergency.
Many people can count on a paycheck each month to help them maintain financial security, but this goal is even harder to achieve if you are self-employed. Recent statistics also show that there are about 9.6 million self-employed workers in the United States today. There are many amazing benefits to being self-employed, like getting to be your own boss, however, you are solely responsible for your financial health. Here are some of the top things you can do to maintain financial security.
1) Budget Your Money
Creating a budget is an absolute necessity if you are self-employed. There are bound to be some months or seasons when you make more than average and other months where it is difficult to pay bills. If you create a budget for yourself and your family you can increase your financial security. The money that you do not spend one month should be set aside to cover other month’s expenses.
2) Optimal Insurance
If you are self-employed you will have to use your own money to pay for your home insurance, car insurance or watercraft insurance. It is crucial that you have good insurance that can cover any damage to your personal property, however, it must also be affordable.
3) Make Good Investments
To help you increase the amount of money that you bring home each year you should make good investments. You can choose to invest your money in a variety of different ways and you may even consider consulting a financial advisor to help. If you are willing to play the odds you can invest in stocks and bonds and find the ideal stock for you and your family. If you are not willing to risk your money you can make more secure investments, like investing in property.
4) Save For Taxes
As a self-employed worker, you are going to have to save money to pay your own taxes. If you own your own business your taxes might be much higher than a typical individual paying taxes. If you have been self-employed for years you likely can estimate how much you will need for taxes at the end of the year.
It is best to start saving for your taxes now rather than trying to scramble and find money to pay them at the end of the year. The self-employment tax rate is 15.3% so you should be prepared to set at least this much aside for the end of the year.
5) Create An Emergency Fund
While you have likely already started saving money in your savings account for big expenses in the future, like schooling, buying a house, or buying a new car, you also need to create an emergency fund. Most experts recommend that you have three to six months of income set aside in case of an emergency. This rule is even more crucial if you are self-employed and dependent upon only yourself for income. The size of your emergency fund depends greatly on the budget that you have created for yourself and your family.
You can use this budget to help you decide on how much you would be comfortable having in your emergency fund. This emergency fund can help make people more financially secure and help give them peace of mind. If you know that you have rainy day money set aside you will be less panicked if the unthinkable happens.
6) Plan For Your Future
If you are self-employed you will not have a pension or a retirement fund waiting for you when you retire. It is up to you, and only you, to plan for your future. You likely have an idea of how you want to spend your retirement and for most people it includes travelling the world, relaxing, spending time with family, and doing things that you have always wanted to do. You do not want to spend your retirement thinking about money and how you wish you had more.
Starting to save for retirement now and investing in a 401K can help ensure that you have all the money you want and need when it comes to retirement. Planning for your future is a crucial step in becoming more financially secure.
These six things are some of the smartest ways that you can manage your money if you are self-employed. Speaking with a financial advisor or your current financial institution can also help you save money and be prepared for whatever life holds.
