From working with independent and self-employed individuals on a daily basis, we see that many have the opportunity to increase their earnings significantly by recognizing the value of their skill set, experience, and capabilities while negotiating with clients. However, to succeed in self-employment, or building your business, establishing financial stability and building savings is important. Whether you are a freelancer or a contractor, there are several effective saving strategies that you can implement to ensure that you are on the right track and investing in your future you!
Create financial goals, budget and stick to them!
In general, it helps to keep an amount in mind and set it as a concrete goal. Such goals encourage you to develop healthy long-term money habits and increase your odds of hitting your benchmarks.
Creating a goal and budget is a crucial first step in achieving financial security and stability, regardless of the form of employment. It provides a clear understanding of your income and expenses, which is essential in managing your finances effectively. By monitoring your cash flow and identifying areas where you can cut back on expenses, you can make informed decisions about your spending habits.
Furthermore, setting a budget and sticking to it allows you to allocate your resources more efficiently, ensuring that your income is maximised. When you have a clear idea of where your money is going and what you want to achieve, you can prioritise your spending and avoid frivolous expenses. This can lead to significant savings over time, enabling you to achieve your financial goals faster.
Build up a financial cushion
Planning for the unexpected is important for everyone. It’s often the unexpected costs that cause the most amount of stress such as car repairs but there's also the recurring costs that tend to slip our minds such as insurance renewals and the costs you know are coming such as Christmas. Having a financial cushion is essential to not impact your saving goals. Planning for irregular income means estimating your average monthly income and setting aside a portion of your earnings during your peak months, so you can create a financial cushion and continue to save if you do decide to take some time off.
Start to think ahead
Equally important is planning for your future and incorporating retirement savings into your budget. Start paying into a private pension as soon as you can. Try being strict with your contribution and contribute as much as you can afford on a consistent basis. Simply put, the sooner you start, the more you'll have in retirement. Putting off payments will potentially disrupt your savings in the long run.
Set-up a business bank account and manage it effectively
For anyone who has established their own business, they will have set-up a business bank account as part of the limited company set-up process. However, for those independent professionals who currently operate as freelancers, it's vital to keep your personal and business finances separate.
Having a separate business account allows you to manage your finances more effectively. You can easily track your business expenses, including business-related travel, equipment purchases, and other costs. By keeping accurate records of your income and expenses, you can claim reclaim relevant tax on applicable costs, reducing your overall tax liability.
In addition, having a separate business account can make tax season much more manageable. You won't have to sift through personal transactions to find business expenses, which can be time-consuming and prone to errors.
Simplify your savings
Many banks and financial institutions offer automatic savings plans, where you can set up a recurring transfer to a savings account, and this can be a powerful too when taking control of your finances and savings!
Firstly, it can take the stress out of managing your finances. Once you set up the transfer, you don't have to worry about remembering to save each month, saving your time and energy in the process! Second, automating your savings is a great way to ensure that you are consistently putting money aside and avoiding overspending. When you have money sitting in your current account, it can be tempting to spend it on non-essential items. By moving a portion of your income to a separate savings account, you can create a buffer and avoid this temptation, whilst helping your reach your goals faster!
Try to cut back where possible
Cutting back on unnecessary expenses doesn't mean sacrificing your quality of life. Instead, it means being mindful of your spending and making intentional choices about how you allocate your resources. By cooking at home more often, cancelling the subscriptions you don't use, and being mindful of your energy consumption, you can save money without compromising on the things that matter most to you.
Not only will cutting back on expenses help you achieve your financial goals, but it can also give you a greater sense of control over your life. So embrace the power of cutting back on unnecessary expenses, and start building the financial future you deserve today!
Don’t go at it alone – optimize your accounting and wealth management partners
Finally, just because you are an independent contractor does not mean you have to go it alone. Take advantage of the knowledge and support available from the community of independent professionals and contractors.
At Icon Accounting, we offer tailored solutions and supports to help self-employed individuals manage their finances more effectively. With our guidance, we can ensure you receive everything you are entitled too, and you can feel confident in your financial decisions and take proactive steps towards achieving your financial goals. Why not get in touch with your team today!
Furthermore, we at Icon Accounting are committed to going the extra mile by providing our clients with access to essential financial planning advice through our Wealth Management partner, Rockwell Financial. From pensions, investments, income protection, life coverage to mortgage queries, the Rockwell Financial Management team is available to offer financial advice to any Icon Accounting client, free of charge.
To find out more, you can organise a consultation now or by contacting email@example.com, where we will be more than happy to set up a call on your behalf.