Money Organisation and Productivity

How To Manage Money Wisely If You’re Self-Employed

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Being self-employed, whether you are a freelancer, sole trader or contractor, brings an extra layer of responsibility when it comes to managing your money. Your finances won’t be taken care of by an employer; you’ll have to manage everything yourself. I am self-employed so I know first-hand that this can be challenging sometimes! So what is required of us, as self-employed people, to stay on top of our finances? Let’s take a look at how to manage money wisely if you’re self-employed.

How To Manage Money Wisely If You're Self-Employed

How To Manage Money Wisely If You’re Self-Employed

Complete your tax return early

One of the biggest hurdles when you’re self-employed is having to fill in your self-assessment tax return. I don’t know anyone who enjoys this – it’s certainly not a fun task. However, it can be made into a more relaxed process if you start it early. This will eliminate any sense of rush or stress because if you run into any complications, you’ll have time to do your research and sort them out.

You could even spread out your tax return over time, for example by committing to completing just one page of it per day (or even per week, if you have plenty of time left). This would turn a mammoth task into a series of short and straightforward ones. Just make sure to write this down in your planner each day/week so you remember to do it.

Read more: Setting ‘Micro Tasks’ for Improved Productivity

In the past, I’ve been guilty of leaving my tax return to the last minute, but I’ve learned over the years that starting it early is a much better idea!

A birds-eye view of a white desk with a calculator, tablet, cup of coffee and laptop. A man's hands are using the laptop.
Photo by Tyler Franta on Unsplash

Get an accountant

You might not understand all the complications of managing your money – I certainly don’t. If you struggle with money-related tasks such as tax returns or bookkeeping, it could be worth getting expert help. You can make use of accounting services for sole traders to handle your finances for you. This will take the pressure off you and you’ll also feel reassured that everything has been done properly. Not to mention it will save you time.

Of course, getting an accountant costs money, but the benefits could be well worth the cost, especially if you find money management difficult or time-consuming. I’ve never personally used an accountant, but I have a good friend who is also self-employed, who uses one. He has found it such a relief to have this aspect of life managed for him.

Keep records and check them regularly

Hopefully, you already know that it’s a good idea to keep records of all your earnings and work expenses. But how often do you go back and check them? It’s easy to occasionally miss writing something down, especially if you have money coming in from a variety of different sources.

On a monthly basis, I go through my records, comparing them against my online banking and my diary. I double-check that I’ve written everything down, make sure that any cheques I’ve paid in have cleared, and check if I am owed any outstanding payments. I also check that I’ve remembered to record all my expenses. Doing this while things are still fresh in my mind helps prevent uncertainties or discrepancies further along the line.

Read more: 5 Everyday Money Management Tips To Help You Feel In Control of Your Finances

An open 'Finance Tracker' notebook, and a Monthly Budget sheet, along with a gold coloured pen and a wooden pot of paperclips.
Photo by NORTHFOLK on Unsplash

Pay cash into the bank regularly

If you get paid in cash, I recommend paying it into the bank regularly, rather than letting too much cash accumulate at home. It’s much safer in your bank account, rather than sitting around in your home – imagine if there was a house fire or a burglary. Also, the sooner it’s in the bank, the sooner you can potentially earn interest on it, especially if you’re able to put some of it in a savings account.

Here’s another tip – make other trusted members of your household aware that you often have a build-up of cash. This way, if they ever need cash they can effectively use you as their cash machine, getting cash from you and paying the value back into your account by bank transfer. I have several family members that do this and it’s a win-win because it saves me a trip to the bank to pay in my cash, and saves them a trip to the cash machine.

I will also mention cheques here. I don’t often get paid by cheque these days, but when I do, I make sure to pay them in straight away. Otherwise, I risk forgetting about them, or worse, losing them. Thankfully, it’s possible to pay in cheques using my banking app these days, which is so much more convenient than taking them to the bank. This has allowed me to build the habit of paying in cheques immediately upon receipt.

Four £20 notes laid on a dark surface.
Photo by Colin Watts on Unsplash

Consider a pension

Did you know that fewer than half of self-employed people are paying into a pension? When you’re self-employed, you don’t automatically get a workplace pension, so you’ll need to take matters into your own hands if you want to receive more than the state pension when you retire.

While you may be tempted to put all your savings into a savings account rather than a pension because it’s easier to access your money, a pension will almost always give you more money in the long run because you get tax relief on it. So it’s certainly something to consider, even if you can only afford to make small contributions to your pension. It will all add up and you’ll be grateful for it in later life!

Read more: How To Secure Your Financial Future

How To Manage Money Wisely: Wrapping Up

If you are self-employed, I hope this post has been helpful and that you’ve picked up a few tips for how to manage money wisely. By keeping on top of your tax return and cash payments, checking your accounts regularly, considering a pension and enlisting the help of an accountant when needed, you’re sure to feel more in control of your finances and have an easier time in the long run.

Related post: Will Having Depression Affect My Life Insurance?

Do you have any stories or advice to share when it comes to managing your money? I’d love to hear from you in the comments below!

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How To Manage Money Wisely If You're Self-Employed

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