Managing your financial affairs when self-employed
There are many rewards when working for yourself; no boss, freedom to choose your own hours and some lifestyle perks. However, self-employment also means you are responsible for balancing your personal and business funds.
Consider the following tips to better manage your personal and professional affairs:
It is a good idea to get into a habit of paying yourself a weekly wage to cover your living expenses. This helps to prevent you from dipping into the business accounts too often.
Don’t neglect your super
You may neglect contributing to your super during slow periods of cash flow but this can dramatically impact your savings come retirement. Relying on the sale of your business is prudent; you may not sell for as much as you hope for, or in some circumstances, you could become bankrupt. Having savings in a different investment vehicle can give you peace of mind and protect you in such unfortunate circumstances.
Plan ahead for tax obligations such as PAYG, GST, FBT and so on. Keeping on top of your taxes is key to avoiding hefty penalties from the Tax Office.
Cash is king
It’s an old adage, and for good reason. An adequate amount of cash or “liquid” assets can immensely help your business during tough slow periods or if unexpected expenses come up.
Invest in the business
As tempting as it is to dip into business funds, don’t let this become a habit. Keeping your personal and business affairs separate is key. Although you still can enjoy the benefits of owning your own business, you should be using a portion of the business’ profit to invest back into the business. Successful businesses are the ones that are continually growing and developing.