How to be self-employed and save money

As anyone who has gone self-employed will know, money equals time. Sometimes this means we take on as much work as possible, whereas on other occasions it can mean that we don’t generate as much income as we’d initially hoped. This fluctuation in earnings can make it quite hard to have the restraint to put money aside for a rainy day. If you’re living relatively hand-to-mouth, or aren’t quite used to the varying income, there are a few techniques you can try. 

Get insured

While many of us might not like to think about how an accident or a loss of income would affect our day-to-day living, it’s something worth planning for. It might become even harder, or almost impossible to save if a mistake causes you to be temporarily without any earnings. Even though you may feel that your work is of high-quality, disputes can still happen. For businesses in the UK, free resources from leading business insurers are available to help with your research. Hiscox UK have a wealth of information on indemnity insurance for business owners to review before deciding on the right level of cover. 

Save as soon as you are paid 

The benefit of a solid nine-to-five is the predictability of being able to budget as soon as your salary comes in. Many find it much easier to budget when they have a round number to deal with. The best way to deal with irregular payments is to treat them just the same as a monthly wage. If you receive an invoice payment of £300 to last you the week, divide it into the following categories:

  • Utilities 
  • Groceries
  • Entertainment
  • Savings

Or, put aside how much you’d like to save, and then add an extra £10- £50. While this can feel a little scary, it will force you to be slightly more conservative with your spending during the week.

Factor in tax

For those who leave admin until the last minute, your tax is often the one thing that’s left behind. When your tax bill comes through, it can, therefore, be a bit frustrating when trying to figure out a way of covering the total. So it’s always recommended that you factor in your tax bill and National Insurance contributions into how much you save. If you’re unsure of how much of your savings should go into tax, 20% of your salary is a good place to start. 

Limit your credit card use

If you are earning your income in small chunks at a time, you may need to pay for the odd items on credit card. However, if you are bad at limiting your spending, you may need to reconsider this option. Racking up a hefty bill on your plastic could put a severe dent in your savings budget. If you do need one for business, it’s a good idea to limit it to business-use only.

Depending on your cash flow, saving as a sole trader might not be easy – even more so if you struggle to organise your finances properly. Taking some time to evaluate how your transactions could be better streamlined and whether you should dispose of some convenient expenditures (some of which might be going on a credit card) are just a few ways to help you start pocketing some of your hard-earned cash.