- July 21, 2019
- Comments: 0
- Posted by: user
Being your own employer can be scary, fun, challenging and (if you do it right) rewarding. Here are a few tips to help you on your way.
Manage your cash flow
Many self-employed earn a good living. But the money is not always regular. So it’s very important to manage your money carefully and make sure you don’t end up hard up – while waiting on a payment. Keep control of your cash and draw a line between your personal and business’ money. This will help you make the most of self-employment.
Pay your self a wage
Pay yourself a weekly wage. Maintain separate bank accounts for business receipts and personal spending. That way you won’t confuse personal spending with business spending.
Consider placing your business revenue into a high-interest savings account and use this account to pay yourself a set amount as a wage. Or to pay actual business expenses. Putting your business earnings in a high interest account is a simple way of earning extra income through interest.
Plan ahead for holidays
As a self-employed person – you don’t get paid holidays. Save a little extra on a regular basis to fund your holidays. It can also be a handy reserve if things are quite for a while.
Set aside money for tax
A common pitfall for small business is failing to set aside money for the tax man. As you become more established, the Australian Taxation Office (ATO) might also require you to make quarterly pay as you go (PAYG) tax instalments. You do not want to be hit with a big bill you aren’t prepared for – so make sure you keep on top of what to expect at tax time and consult your accountant at the beginning of the financial year on what to expect.
Open a separate account to pay off taxes and deposit regularly. Remember, there are high penalties for late tax payments. And don’t forget about GST.
Think about superannuation
Almost a quarter of self-employed Australians had no superannuation at all in 2012, according to research by the Australian Super Funds Association (ASFA). Superannuation is a tax-effective investment for retirement savings. Adding to your super can also reduce the tax on your current income. Talk to your accountant about government super co-contribution. Don’t depend on selling your business when you are ready to retire.
Think about illness
As a self employed person your business hinges on your ability to generate income. So if you suffer an illness you could be in serious financial trouble. You should have income protection insurance. Another good idea is to have an emergency fund to tide you over short periods when you are unable to work. You should also have an emergency plan already worked out and ready to go for when you need it. For example; is there someone who can take over, other businesses you can temporarily farm work out to or ways of suspending jobs for short periods?