There are two types of people in this world:
1. Who wants to earn fixed monthly income by avoiding risks. These types of people generally work under others and help them in achieving their goals. In simple terms, employees.
2. Who wants to follow their heart and works on accomplishing their dream. They don’t fear the risk of uncertain income and believe in being their own boss. In short, a leader/boss.
So, which category do you belong to? If we are not wrong, your answer must be the second option. Right? You are a self-employed person who loves his/her independence and likes to make their own decisions.
It might look like fun from the point of view of another person. However, it is not!
To be self-employed is very risky and responsible work. You need to make every decision while taking into consideration several factors. A single mistake can impact all your future plans. Moreover, along with your survival, you also have to think about earning profits in what you do.
Woah! That’s indeed tiring! Nonetheless, it is never easy to follow your dream. It is like a track on the mountain, where you get to see the astonishing sunset or meteor shower after climbing up all the hurdles.
Having said that, now let us talk about the hurdle that you are going to or must be facing right now, i.e., your finances. Managing your finances is a bit challenging for you as you don’t get a regular salary.
Moreover, if you shifted to some other place, for instance, Romania, Paris, or Ottawa, it’ll become even more challenging for you. Why? The reason being is that you are already facing the challenge of culture shock. Above that, you need to take care of the money you earn. So plan everything very cautiously to survive the whole month without getting into monetary trouble.
That’s the reason why we’ll help you out. We’ll disclose a few measures to you that’ll help you manage your finances like a pro. We know that you must be getting curious to know the measures, so let’s get started!
Create A Different Account For Receiving Money
Most self-employed persons make a common mistake of using their personal bank account to receive money for their work. And that our dear reader is a mistake that you should never make. We repeat, “Never!”
You must be wondering- “What is the need of creating a different account when you already have one?”
The answer to this question is that having a shared account for personal and professional expenses will create confusion. There is the possibility that you unknowingly use excess money. By the end of the month, you are facing the issue of cash crunch.
Besides that, if you have separate accounts, it becomes easy to keep track of income earned and daily expenses. Not to forget that it will also help you while filing your taxes.
Understand Your Income Pattern
The next thing you need to do is to understand your income pattern.
As you are self-employed, you don’t have a fixed income source like others.
Moreover, there is no guarantee that a person who made a purchase will return to you. That’s why you need to learn about people’s purchase patterns to create a draft of the income pattern. It will give you an idea about the average amount of money that you’ll earn each month.
Create A Budget
After you have learned about your income pattern, you need to create a monthly expense budget.
It will help you in understanding earning and costs of operation. As you have no control over the earnings fluctuation, you need to create the budget carefully. Remember that just because you earned well in one month doesn’t mean that it’ll happen every month. You need to be prepared for unexpected circumstances.
So while you are creating a budget, keep the average of income and expenses in your mind. Nonetheless, you also have to include the expense of taxes in the budget.
Plan For The Taxes
Talking about the taxes, it is essential that you shouldn’t miss out on the dates of filing the returns. Every country has its own policies and rules related to taxation. Some countries give exemptions to those who are not citizens of the country while some don’t.
For example, suppose you are a nonresident in the U.S.
In such a situation, you don’t have to pay self-employment tax. However, imagine you live in Romania; in such a situation, you have to file the return.
As a matter of fact, the taxes are pretty complicated there. Therefore you might have to take assistance for tax returns and tax services for Romania to save time. That’s the reason why you must plan for them along with the expenses.
Set A Target To Save Some Percentage Of Earning
The next thing you need to do is to set some percentage of your earnings aside every month. Why?
Well, the reason behind this is that it encourages the habit of saving money.
And that is very important when you are self-employed. The money you’ll save every month will help you when you are planning to expand your work operations or in purchasing better tools and equipment.
Look For Investment Opportunities
As you don’t earn a fixed income every month, you need to think about making investments.
Let’s be honest, no matter how much you are earning, it isn’t possible to get satisfied with the earnings. Besides, if there is a risk of uncertainty associated with the work you do, it is always a good idea to invest.
In simple words, you should look for opportunities to invest your earnings and avail profits.
Last but not least, you need to be wise. Don’t make any rash decisions to spend your money.
Think about all the pros and cons you’ll get taking the decision you are considering.
In addition to this, you also have to create a backup plan. As life is uncertain, you also have to keep some funds separate for emergencies. Nonetheless, the investments you are making should also benefit you after your retirement. So, be wise!
To Sum It All Up!
All these measures will help you in managing all the money you earn.
Thus, you won’t face the issue of cash crunch and neither of the tax penalty.
Therefore, you must follow them and proceed with your self-employed journey with little less hassle.
This article is written by Saara Green, all views and opinions expressed are her own.
Thanks for reading, please let me know your thoughts and comments below.
Top 10 Popular Posts Of All Time
- Top 30 Canadian Blue Chip Stocks You Should Own
- How To Use A My Service Canada Account
- How To Watch Free TV Shows In Canada – List of 10 Best Sites
- VGRO Review – Vanguard’s Best Growth ETF Portfolio
- Top 7 Canadian ETFs You Should Own
- Top 150+ Dividend Stocks In Canada – Complete List
- Credit Karma Canada Review – Free Credit Score And Report
- CPP Payment Dates – How Much CPP Will You Get?
- Top 5 High-Interest Savings Accounts In Canada
- How To Open A CRA My Account?