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Earnings can fluctuate when you’re self-employed, so it’s even more important to plan for the future. But it’s not easy! In this article, we’ll look at the ways you can enjoy self-employed life without worrying about what’s to come.

Get started by understanding your finances

It’s hard to make any kind of plan without first understanding exactly where your business is at financially.

Start by looking at your income, expenses and any existing debts or financial obligations. Next, create a detailed budget that outlines your monthly income and outgoings to spot areas where you can save towards future goals.

Include time off in your pricing structure

As an employed person you’re entitled to things like sick pay, parental pay, and holiday pay. Being self-employed means you don’t get these things automatically, so it’s important that the price you charge your clients factors in enough wiggle-room to cover any time off you might need to take, such as:

Plan for retirement

You won’t automatically get a workplace pension when you’re self-employed, so it’s useful to research tax-efficient ways you can save for the future, such as by setting up a private pension.

It can also be helpful to think about what retirement goals you’ve got along with your financial situation now, plus any existing retirement savings or investments. Will you need a pension that covers any outstanding mortgage or debts when you retire? Consider other factors too, like living expenses, healthcare and inflation.

What will you do with your business?

Whilst we’re on the subject of retirement, it’s worth thinking about what happens to your business when you do eventually retire. This might involve handing it over to family members or business partners, selling it, or simply shutting up shop.

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Get the right insurance in place

When you’re self-employed, there are lots of different types of insurance you need to have in place to protect your business and yourself. For instance:

  • Public liability insurance can cover legal costs and compensation if someone claims injury or property damage due to something your business has done
  • Professional indemnity insurance can safeguard your business against claims of negligence or mistakes in your work
  • Employer’s liability insurance if you have any employees
  • Product liability insurance if you sell physical products

Then you’ve got personal insurance to think about too. This could be income protection or critical illness cover that can provide financial security in case you’re unable to work due to illness or injury.

If you’re not sure what type of insurance to buy, it could be worth getting advice from an insurance advisor to tailor a comprehensive insurance package specifically for self-employed people.

Diversifying your income stream

Ever heard that expression “don’t put all your eggs in one basket”? The same can apply in business which is why exploring opportunities to diversify your income streams and spread-out risk may not be a bad idea. For example, are there any additional services you could offer? Might you be able to create passive income streams at all?

At the same time, try to avoid relying solely on one client or source of income where possible. It will mean your income takes less of a hit if you lose a client or they reduce their spending.

Keep upgrading your skills

Industry trends and new technologies in your field can move fast, so stay ahead of the curve. Continuous learning will help you remain competitive and adaptable to market changes, so it’s well worth investing time and resources in developing new skills or brushing up existing ones. You might even be able to claim your training costs as an allowable expense.

This could involve taking online courses, attending workshops or heading to networking events. It all opens doors to new opportunities, collaborations and potential clients.

Being self-employed is great, but it certainly comes with its own challenges! Why not learn more about our online accounting services for self-employed people? Talk to one of the team on 020 3355 4047 or feel free to get an instant quote online.

About The Author

Dean Salmon

I'm an AAT and ACA qualified Chartered Accountant with over 13 years experience working with businesses, contractors and sole traders. I also love watching live music, and quizzes! Learn more about Dean.

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