Press "Enter" to skip to content

Financial Tips for the Self-employed

Being self-employed has some benefits: You get to choose your own hours, you don’t have to count “vacation days” and you’ll never worry about getting downsized. On the other hand, you’re truly
on your own – there’s no employer-sponsored retirement plan and no benefits package. So, if you’ve recently started a business or become a “gig worker,” possibly due to the COVID-19 pandemic, what can you do to get on the road to financial security?

There are several steps you can take, including the following:

Establish a Budget

When you’re self-employed– and especially when you’re first starting out – you need to keep tight control over where your money is going. So, establish a budget and stick to it.

Open a Retirement Plan

As a self-employed individual, you can choose a retirement plan, such as a SEP-IRA, a SIMPLE-IRA or an “owner-only” 401(k).When your earnings are limited, you can contribute modest amounts to any of these plans, but when your income rises, you can boost your contributions. While these retirement plans have some things in common, including tax-deferred growth of earnings, they differ in other areas, such as contribution limits, and one plan may be more suitable for you than another, depending on whether you have
employees. You may want to consult with a financial advisor to determine which plan is best for your needs.

Build an Emergency Fund

When you work for a business or other organization, your income is predictable – but that’s usually not the case when you’re self-employed. And when your earnings are uneven, you can be vulnerable to financial stress when you face an unexpected expense. To help protect yourself from these threats, try to gradually build an emergency fund containing a few months’ worth of living expenses, with the money kept in a liquid, low-risk account.

Pay Down Your Debts

Some debts, such as loans to help your business, may be unavoidable – and even productive. But other debts, especially those that can’t be deducted from your taxes and carry a high interest rate, are far less useful, so you may want to set up a repayment plan. With your other expenses, you might not be able to whittle these debts down as fast you’d like, but, over time, your efforts can pay off.

Put Money Aside for Taxes

Because no employer is withholding taxes from your paychecks, you will likely have to make quarterly estimated payments. Plus, you’re responsible for all your Social Security taxes, which, if you worked for
someone else, would be split between you and your employer. To make sure you’ve got enough money available to pay your taxes, you might want to set up a special account – one that’s not used for any other purpose.

Get Proper Insurance

Depending on the nature of your work, you may or may not need some type of business insurance, but if you have a family, you should certainly consider the need for life insurance, and you may also want to consider
disability insurance.

Self-employment can be quite fulfilling – and you’ll find it even more rewarding when you make the right financial moves.


cameron Thrall, Cameron Thrall auburn examiner, cameron thrall edward jones, cameron thrall auburn wa, cameron thrall financial advisor, cameron thrall investment
Cameron Thrall

Cameron Thrall is an Auburn-based Edward Jones Financial Advisor. He has a BA in International Studies and an MBA. In addition to his Series 7 and 66, Cameron is also an Accredited Asset Management Specialist.

When not helping clients make smart financial decisions, Cameron can be found cheering for the best NHL Hockey team (the Capitals) or local favorite the Seattle Thunderbirds.  Cameron and his wife are also avid fliers, flying both airplanes and helicopters. You can reach Cameron at his new Edward Jones office on 3rd Street NW in Auburn.

Subscribe to our FREE newsletter and never miss an Auburn Examiner article or update!
Auburn examiner, auburn wa news, local auburn wa news, today in auburn wa

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *