By TKay Nthebe
Being self-employed gives one the freedom to own and manage their time, which can be very rewarding. Depending on the type of structure i.e. sole proprietorship, partnership or as a sole director of a private company you’ve opted, however, being self-employed also comes with many challenges such as cash flow management and managing personal finances. This week’s article provides tips when working for yourself to help you better manage and grow your money.
- Know and understand your income streams.
As someone who works for himself, I cannot emphasize the importance of knowing and understanding all your income streams. In truth, being able to make sales and generate income is the bloodline of any business.
Asking questions such as ‘How do you make money? ‘How much money do you make daily or weekly?’ How often do you receive income? Which sales channel is the most profitable? How do you manage the cash flow? How much do you keep? How can you increase your income streams?’
Depending on the nature of your business, it is key to identify all the income streams. Understanding and managing cash flow – how much money flows in and out of the account is also important.
- Know and manage your monthly expenses.
Money coaches often encourage people to spend less than they make, track expenses and live below their financial means. The same applies to people who are self-employed. Spend time identifying all your monthly personal and business expenses for example rent, connectivity, personal care and transport costs. It is also important to separate your personal and business expenses so you can take advantage of some tax benefits. The tax authority allows some expenses incurred in the production of income to be tax deductible.
- Build up savings and reserves.
In previous articles, I have encouraged people to ‘pay themselves and invest for the future’. The same applies to people working for themselves because of the uncertainty that comes with being self-employed. Building up savings and reserves for the future is thus important. You can start by putting away at least ten (10) to fifteen (15) per cent of your income or sales to build reserves. Take away the stress by automating the process. Leverage technology to transfer the savings automatically to your savings and investment accounts.
- Take care of your health
Many people who are self-employed often work long hours, often neglecting their health – not exercising, sleeping enough, or eating well. Because the business often depends on them, should they fall sick, burn out or get injured, self-employed people are exposed to the risk of costly medical expenses and loss of income. Worse, many do not have any health plan – medical aid or hospitalisation plans in place. I advocate for a wellness routine/program for people who are self-employed – prioritising rest, eating well and regular exercise to keep the body and mind healthy. Also, have a plan to take care of the medical expenses should you fall sick or be injured.
The dynamics of working for yourself are vast and often complicated. The next few articles will be dedicated to sharing tips and strategies to help self-employed people navigate and manage their finances better. Likhomo!
