Managing money when you’re self-employed
Over the last ten years, self-employment in the UK has been sharply on the rise. Whether the decision to go self-employed is through circumstances, opportunity or looking for a change from the traditional 9 to 5, self-employment comes with a whole host of challenges and managing your money is just one of many. If you’re new to working for yourself, here are some key money management tips to keep in mind as you dive into self-employed life.
Separate your personal and work finances
Regardless of your business structure and whether you are self employed or you set up a limited company, separating your personal and work-related finances is the most important step you can take to stay on top of your finances. Having a strict division between personal finances and work finances allows you to see how much you are earning, what you’re spending and to have a crystal clear view of your work financial situation. You can easily open a new bank account with a high street or digital bank, so there’s no reason to delay. You’ll thank me later.
Don’t forget about tax
When you make the move from employment to self-employment or running a business, you discover a whole new world of financial responsibility that doesn’t exist when you work for someone else. From invoicing to tax returns, getting paid and staying on the right side of HMRC isn’t as simple as it might sound. There are many horror stories about freelancers who forgot about tax until HMRC landed a five-figure bill on their doorstep, so as soon as you become self-employed, set up a savings account or system for tax. Every time you get paid an invoice, transfer money into the tax account and know it’s covered.
Invest in support when you can
When you’re working for yourself, you’re regularly wearing many hats at the same time and in the early days, it can be necessary to stay afloat. However as you grow and your income hopefully increases, try to resist the temptation to avoid outsourcing the tasks you don’t excel at, or which take up a disproportionate amount of your time. Whether that’s marketing, accounting or something else, spending money can be a valuable investment in your career. Seek support where you can and save yourself valuable time and energy.