According to the Truelancer freelancer India survey report of 2018, India has the second largest freelancer population in the world, with the United States of America leading the way.Are you a part of the ever-growing, self-motivated self-employed workforce in India? If so, this article is for you! Let’s get started, shall we?
Managing personal finance can seem like a daunting task for self-employed. With no steady paycheque to rely on and ever-changing tax regulations, even the most experienced person can feel overwhelmed. But don’t worry! Taking control of your finance is easier than you think.
6 Tips to Effectively Manage Personal Finance for Self-employed
Experts have compiled these 6 financial hacks to help you plan and secure your financial interests. Check them out!
You showed a willingness to embrace uncertainty and step out of your comfort zone whenyou decided to become a self-employed professional. Thus, having a contingency fund is one of the essential steps for managing your finances.
It helps cover unexpected expenses such as medical bills, car repairs, or legal fees. Even long-term objectives and obligations can be fulfilled with the help of this emergency sum. The best choice for a contingency fund is liquid mutual funds or online saving accounts.
Taxes can be the biggest challenge for self-employed individuals. But tax planning is essential for managing your finances and staying on top of your taxes. So, how to save taxes for the self-employed! It is critical to understand the various tax regulations and deductions that are available to you.
You get the freedom and also the task of managing your taxation on your own. Set up a system to track your income, expenses, and deductions. This will help you stay organized and make filing taxes a breeze.
This tip is critical for you if you are transitioning from getting a fixed income (salary) to being your own boss. One of your biggest challenges is dealing with an irregular income. It can be a draught some days and flooding of funds other days!
So how do you make a budget with so much uncertainty? What you can do is, set up a budget that is based on your average monthly income. This way, you can sort your finances and ensure you are saving for the future. Also, keep your contingency funds handy when needed.
4. Invest for Your Retirement
Saving for retirement is essential for all business owners, primarily self-employed individuals. This is because you don’t get the benefit of the employee provident fund (EPF) that a salaried worker gets to build their retirement corpus. You are also ineligible for retirement gratuity benefits.
Investing your money in stocks and bonds, purchasing real estate, or setting up a retirement savings plan, are some productive ways of retirement planning for self-employed.
Most freelancers do not have a current account to handle business needs. Instead, they simply have a bank savings account. Therefore, whatever money is made is used to pay for either personal or business expenses. This is a recipe for financial disaster.
Keeping your business and personal finances separate will help you stay organized and make filing taxes easier. So never merge the two!
A company’s policy/insurance wouldn’t cover you. Thus, it’s wise to buy these covers yourself. Investing in life and health insurance coverage can help protect you and your family in case of an unexpected illness or accident.
With increasing healthcare costs and inflation, it is undoubtedly a non-negotiable step for the self-employed. Otherwise, these unplanned emergencies could eat your savings and hamper your financial growth.
Overall, self-employed individuals like you need to take the time to manage your finances carefully.
By taking the advice of experts, such as creating and following a budget, setting up an emergency fund, and, investing in retirement plans, you can stay ahead of your financial goals and ensure your success. With a little bit of effort, it is possible to stay on top of your finances and achieve financial freedom.
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