Home
>
Small Business
>
Self-Employment: Managing Your Money: Tips for Living with a Fluctuating Cash Flow (Part One)

Self-Employment: Managing Your Money: Tips for Living with a Fluctuating Cash Flow (Part One)

The way you manage your money is one of the first things you'll change when you move from employment to self-employment.

You are moving from an environment where you received income in equal amounts at set intervals to one where your income fluctuates.

Managing money in such circumstances is unfamiliar and, for most of us, uncomfortable.

These are some tips I developed from my experience of 10+ years of self-employment.

? KEEP GOOD RECORDS

When I first got started, an old CPA friend of mine had three words to say. "Keep good records."

Maintaining good records of your money transactions helps you in several ways.

It helps you track your income and spending so you can create a realistic budget.

Your financial records become a management tool for your business. If your records are accurate and up to date, you can track changes in income and spending ? and take appropriate action, when necessary.

There's gold in those records. As a self-employed person you can deduct all kinds of business expenses. But you have to be able to substantiate them with evidence (receipts, invoices, credit card slips, mileage logs, etc.)

Lastly, keeping good financial records keeps the authorities happy when they come calling. The IRS audit rate of self-employed people is higher than almost any other group.

? OPEN SEPARATE CHECKING AND SAVINGS ACCOUNTS FOR YOUR BUSINESS.

Having separate bank accounts in your business's name does a great deal to prove to snoopy tax authorities that you are really running a business and not a hobby.

But more important, it helps you to keep your records straight.

Money you generate and spend in the process of conducting your business goes through your business account, all other money goes into your personal account.

TIP: If you are a sole-proprietor, don't intend to have employees, and don't anticipate a need for business loans, your account can be a separate personal checking account. All that is necessary is that your account be in the name of your business.

If your bank insists that you open a higher cost 'business acccount,' consider going to a credit union, where rates and terms are more favorable than those of commercial banks.

? THE BANE OF FLUCTUATING CASH FLOW

Managing fluctuating income is one of the biggest challenges of self-employment.

The most difficult part of having a fluctuating cash flow is dealing with the anxiety that arises when cash flow is tight.

Most people who have been self-employed for a considerable amount of time develop a simple faith that money will flow again. But it gets uncomfortable for us, too, when the downturn is severe or prolonged.

Here are some tips on coping.

Have a marketing plan and stick to it.

Shift your spending to mimic your cash flow. In other words, spend more when money comes in, cut back when it is not. And put away some cash for a rainy day.

Keep your obligatory monthly payments as low as possible. These are the necessities that are billed monthly such as telephone and other utilities, car payments, etc.

If you must put a purchase on a monthly installment, as, say, most people do when they buy a car, opt for the longest-term loan possible.

A longer loan term lowers your required monthly payment. This makes it easier to fulfill your obligations during lean months. Pay more than is required during fat months to pay down these loans (this will reduce your total interest payments and pay off the loan more quickly).

Rather than paying for web hosting and other services on a monthly basis, opt for an annual installment that comes due during a fatter month. Not only do many web hosts give you a discount for choosing the annual option, you eliminate one payment you must come up with during a lean period.

Continued.

Ellen Zucker has been successfully self-employed for over 10 years.

Self-Employment 101: It's about making a living and creating a life! ... Observations, information and resources for those of us who are self employed or just thinking about it. http://www.selfemployment101.com

http://www.selfemployment101.com can get Ellen's articles delivered to their email inbox.

custom home cleaning Wilmette ..

In The News:

Scammers create fake Evite invitations that mimic legitimate event emails, requiring users to verify senders and use antivirus software for protection.

The new Apple Watch hypertension feature passively monitors blood pressure patterns over 30 days using sensors to detect chronic high blood pressure signs.

Chrome extension spyware disguised as a free VPN service highlights security risks after it captured private browsing data from trusted sites.

New research shows how fatty acids in cooking oil can safely dissolve and recover silver from circuit boards without harmful chemicals or environmental damage.

The Fox News AI newsletter gives you information on the latest AI technology advancements, and about the challenges and opportunities AI presents now and for the future.

Anthropic investigates alarming AI abuse case where hacker automated entire cybercrime campaign using Claude, stealing sensitive data from defense and healthcare firms.

TikTok, Meta and YouTube restrict Charlie Kirk shooting videos with age gates and warnings while X faces criticism for allowing continued circulation.

Cybercriminals use fake troubleshooting websites to trick Mac users into running terminal commands that install Shamos malware through ClickFix tactics.

San Francisco startup Fable launches Showrunner, an AI platform dubbed the 'Netflix of AI' that generates animated episodes from text descriptions with Amazon support.

Apple raised iPhone prices for some models despite receiving tariff relief from President Donald Trump, with the new lineup starting at $799 for the base model.

A two-story 3D concrete printed home in Western Australia demonstrates faster construction methods that could reshape American housing amid rising costs.

Credit scores remain important during retirement for insurance rates and housing applications, while seniors become prime targets for identity theft and financial scams.

Scammers now send unexpected packages with QR codes that redirect victims to fraudulent websites or download malicious software to steal sensitive information.

Meeting AI tools record private conversations alongside work discussions, creating privacy risks that can be managed with proper settings and awareness.

Hotel privacy concerns are valid but rare, with methods to detect hidden tech using smartphone flashlights, mirror tests and scanning apps.

Improve your Wi-Fi speed and reliability with 10 simple router optimization tips that don't require special apps or expensive subscriptions.

A Columbia University breach exposed names, Social Security numbers and academic records of nearly 869,000 people, with notifications beginning in August.

Rental car drivers use AI-powered apps like Proofr to protect themselves from unfair damage fees as major companies deploy automated inspection tools.

Fox News' AI newsletter brings you the latest on technology advancements around artificial intelligence.

OnTrac data breach between April 13-15, 2025, exposed personal information of over 40,000 people including Social Security numbers and medical records.

A woman named Wika announces her engagement to an AI chatbot sparking worldwide debate about virtual relationships and technology.

The notorious people search site National Public Data relaunches despite a previous breach affecting 3 billion individuals, raising fresh privacy concerns.

Revolutionary TRAUMAGEL gel controls life-threatening bleeding from gunshot wounds and traumatic injuries, helping first responders prevent prehospital deaths.

Protect your home network by enabling proper encryption, creating strong passwords, checking connected devices and using VPN and antivirus software.

The Navy's solar-powered Skydweller drone flew nonstop for 73 hours in Mississippi, proving renewable energy can power long-endurance military missions.

Self-Employment: Managing Your Money: Tips for Living with a Fluctuating Cash Flow (Part One)

Small Business