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.
Wood Dale Chicago prom limo .. Lockport Chicago limo O’HareHave you ever heard the phrase, 'PREPONDERANCE OF PROOF'?I recently... Read More
Home based travel businesses are no longer the wave of... Read More
TACTIC #1 -- Never simply slash your prices, unless you're... Read More
As a business owner, you already know how important it... Read More
The Federal Trade Commission decided to sit down and revamp... Read More
I was floored! I couldn't believe what they were saying!... Read More
Many mobile pressure-washing companies turn to government contacts to make... Read More
You're a small business owner with a hot new product... Read More
1. TargetYou are not all things to all people. Decide... Read More
Now that you have invested your time, energy and money... Read More
Business Process Automation or BPA for short. This was a... Read More
Bookkeeping?the "dreaded" word is something we all have to worry... Read More
Many small business startups fail within the first 2 years... Read More
How a donation is different from a sponsorship and what... Read More
Franchising Directory Sites-Paid Advertising, Lead Generation for FranchisingFranchising Directory Sites... Read More
One major issue not being addressed right now in the... Read More
The day care industry is expanding. There are now more... Read More
1. Don't Spend Too Much Time PlanningWhen you are entering... Read More
Have you ever wondered what the difference is between a... Read More
We're birds of a feather, public relations and small business.... Read More
The Federal Trade Commission out of the blue decide in... Read More
Articles abound advising the business community how to properly screen... Read More
In a perfect world, starting a small business would be... Read More
Work smarter, not harderWhat is one of the best ways... Read More
You need to be visible to attract customers, right? But... Read More
Antigo wedding limo ..If you are just starting your business, or if you... Read More
What's your job profitability? Do you know?Many business owners are... Read More
If you've been thinking about starting a business, but are... Read More
Your on-line success is based on your efforts and yours... Read More
You're a small business owner with a hot new product... Read More
Every business regardless of size needs a "Business Image Manual"... Read More
There are many choices when thinking about a small business... Read More
Once you've decided to incorporate your small business the next... Read More
So you want to get into the auto detailing business... Read More
What unspoken message are you sending your clients and customers?... Read More
The resume writing service serves an important role in the... Read More
Congratulations, you are starting a small business! You are taking... Read More
How do we keep track of our business deals?If you... Read More
If you are a small business and qualify to participate... Read More
Franchising Corporations need to maintain an iron fist when it... Read More
Data. Most people think it is a term relegated to... Read More
If you run a mobile car wash, mobile fleet washing... Read More
Last week we discussed the importance of performing an autopsy... Read More
Many businesses offer small business franchise opportunities. There are many... Read More
Ok, you have successfully accomplished your dream of being the... Read More
As a practitioner and student of Small Business Marketing, I... Read More
When pressure washing heavy equipment each piece of equipment has... Read More
If you are a small business you know that you... Read More
COLLABORATIVE NEGOTIATING:Collaborative negotiating is a win-win strategy that can focus... Read More
Auto Detailing: Maintaining A Commercial Carpet ExtractorYou should drain your... Read More
Small Business |