How To Plan Your Money When You’re Self-Employed

A few weeks ago I posted about how to split your money out when you get paid. But this post focused very much on people who have regular pay and money flowing in. When you’re self-employed and work freelance it can be slightly trickier as you don’t have a steady income. And the money that does come in can come in at random times of the month.

This is the main reason why I don’t think I could ever go fully freelance. The uncertainty worries me too much so I admire anyone who does this. In this post, I’m going to take about how to plan your money when you’re self- employed.

Have your payments coming into a separate account

This is one of the most important things you should begin doing. It can be so hard keeping track of money when you have payments coming in at random times. But by having a separate account that all your invoices get paid into will help this. Not only will you be able to track what has (and hasn’t) been paid, but you can keep this separate. Meaning you won’t start using the money you may have earmarked for something else.

Even though I only do freelance work on the side of a full-time job, I adopt this principle and it helps so much. But it can be a great way to plan your money when you’re self- employed.

Create a regular ‘payday’ for yourself

Now, this might be a little tricky during the first month but I promise you it will be worth it. Every invoice or payment which is made to you from the 1st of the month should be kept in your payment account and not touched. And then on the final day of the month, this will be your ‘payday’. Everything you have earned that month is yours.

Of course, being freelance this figure might change quite drastically from month to month. But the months you earn more you can save more to make sure you’re never short on money. It might be hard to start this off (and if so maybe try this weekly). But getting a once a month larger payment will help you plan your month so much easier.

Work out your regular outgoings

The first thing you probably did to plan your money when you’re self- employed is to work out your regular outgoings. You probably already know what they are, but write them down. This could be rent/ mortgage, bills, subscription services, memberships, regular savings, insurance…. the list could go on.

By knowing the money which will be coming out of your account regularly you’ll be able to plan better how to manage these. If you have a once a month ‘payday’ like explained above it will be much easier to put aside the money for your regular payments. Rather than suddenly thinking ‘Oh rents due next week I need to find £400’ or whatever it might be.

Create a separate account for your regular outgoings

Once you know how much your regular outgoings are create a separate account for them. Then make sure all the payments for these come from this account. This means that when you transfer money into this account either on ‘payday’ or when you get a payment through you know there’s enough in there to cover all your regular payments.

It’s likely that all your regular payments will come out at different times of the month. So this helps keep on top of things. I do this generally and it means I know that the money I have left over is mine to do with it what I want.

Have a savings contingency plan

As someone self-employed, it’s always important to have a bit of a contingency plan just in case jobs dry up one month. Or you’re left high and dry with a payment not being made (we’ve all been there!) One of the best ways to plan your money when you’re self- employed is make sure you’re never left with no money.

You want to ensure that you always have 2-3 months worth of regular outgoings money saved to cover. So if you know your regular outgoings are £800 a month, your savings should have £2,400 in. It might seem like a lot to just have aside but if you’re ill or something happens and you suddenly earn nothing you’ll still be able to live. Future you will appreciate it.

Put 10-20% of your money aside for taxes

Now finally is the most boring of all; tax. As someone who’s self-employed or freelance, you’ll be paying taxes on everything you earn. No one wants to be stung with a huge bill all in one go, but if you save money throughout the year you’ll never be in this situation.

I try and save 20% of everything I earn as I always know this will completely cover all my taxes and I’ll be left with some money left over which I use as a bonus to myself. If you know that after expenses you generally pay 10% or 15% of your wages in tax then save this much. You know your business and your situation best but save something. Again future you will thank you for doing this.

Are you self-employed? How do you plan your money when you’re self- employed?

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