There are many benefits to being self-employed. Individuals can enjoy being their own boss, work whenever they like, and combine their work with other tasks, such as looking after children. Being self-employed is not without its challenges though. It is necessary to strike a healthy balance between work and a personal life, and there must also be the ability to manage finances if everything is to run smoothly.
Keeping track of finances
Self-employed individuals often find it difficult to keep track of their finances. Incoming payments can be unpredictable and coping with admin work, such as issuing invoices and following them up, can be incredibly time consuming. Some self-employed people also report that big businesses tend to lack respect when paying and using contractors and freelancers, often delaying payments or making unreasonable demands. Facing this alone can be a difficult and lonely experience.
One way to take some of the hassle out of being self-employed is to take advantage of the services offered by an umbrella company. These organisations will take care of tax, finance and admin issues. The companies effectively take on self-employed individuals and contractors on temporary contracts, meaning they receive a great range of benefits. It’s essential that individuals choose a company that can offer ir35 compliant payment practices, to ensure that they comply with the tax law.
One of the biggest challenges self-employed individuals face is their own fluctuating income. The amount of money they receive can often vary dramatically depending on the amount of work completed each month. One popular way to deal with this is to think about income in terms of a percentage. As an example, a work-at-home-mum may need to spend money on rent, food, baby care products and leisure activities. Giving each of these areas a percentage, such as 20% each, means the mother is easily able to manage when the budget fluctuates, and doesn’t spend too much in one specific area.
It’s also a good idea to save money at times when the individual is completing a large amount of work, as this can then be used to plug the gaps when jobs are harder to come by. Opening a separate bank account and transferring a percentage of earnings into it each month will ensure money is always being saved for later life, holidays and emergencies. It also removes the temptation to spend more than necessary when earnings increase.
It’s key to think carefully about tax when managing finances. Taxes are not deducted automatically from the payments that self-employed individuals receive, so it’s important to keep a certain amount of money separate to compensate. This prevents people overspending because they’ve forgotten about tax payments. Making a note of key tax deadlines is a good idea, as the penalties for missing these can be extensive. An umbrella company can help with the organisation and management of tax affairs to remove this burden from someone who just wants to get on with the important job of earning the money.
Managing finances is part of life as a self-employed individual. Self-employment is an especially attractive option for mothers who want to keep earning money while looking after children at home. All self-employed individuals can greatly increase the ease with which they operate by using an umbrella company to help with their finances and tax commitments.