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Financial Planning Tips for Self-Employed Workers: Books, Budgets, and More Resources

Being self-employed has many advantages. You get to be your own boss and set your own schedule, plus you don’t have to deal with the rigid structure that comes with working for a larger company. However, financial planning for self-employed workers also rests entirely on their own shoulders.

But we’re here to help. In this article, we will fill you in on the best financial planning tips for self-employed people, recommend financial planning books for the self-employed, and provide you with other financial planning resources should you choose to pursue self-employed work.

Top 5 Financial Planning Tips for Self-Employed Workers

As a self-employed person, whether you’re an independent entrepreneur or have a freelance job, you may not have much experience managing your personal income. But there are several things you need to keep in mind, such as your retirement plan, contribution limits, taxable income, tax breaks, social security, and financial investments.

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Before you get overwhelmed, check out the tips below to get on your way to financial security.

1. Separate Your Personal and Business Accounts

Keeping these separate will provide you with a salary-like structure even though you’re self-employed. It’s incredibly important that you invest a portion of your profits in a financial plan for the future of your business, as well as in retirement accounts. Make sure you also review your accounts on at least a quarterly basis.

2. Use a Financial and Tax Advisor

A vetted financial advisor can provide unbiased, valuable financial investment advice for any investment decisions you want to make, either in the short or long term. They can help you figure out your taxable income and whether you can write off a business expense. They can also help you take advantage of things like office deductions and find out if you can get matching contributions on your 401k.

3. Generate Regular Income

Freelancers and self-employed individuals are no strangers to irregular streams of income. But it’s important to know that certain financial products can offer your more stability by creating other income sources. Tax-efficient tools like insurance products, monthly income plans, mutual funds, and other investment products can help get your personal financial situation in order.

4. Set Up an Emergency Fund

Self-employed individuals should have six to eight months of expenses set aside as a safety net in the event of an emergency. The COVID-19 pandemic is a great example of this. You should keep your emergency funds in the form of liquid assets such as bank deposits or mutual funds.

5. Write a Will and Organize Your Estate

Many self-employed individuals invest in gold, commodities, real estate, and other non-traditional forms of investment. But they can also result in challenging legal matters. So, it’s a great idea to have someone qualified to help with estate planning should unforeseen events occur. You may also want to contribute to a traditional retirement fund via a defined-contribution plan.

5 Financial Mistakes to Avoid for Self-Employed Workers

Managing your own company and investment portfolio while paying employees may not be easy. Below are some financial missteps that you should try to avoid.

1. Failing to Set Up a Retirement Plan

According to the World Bank, life expectancy in the US is now nearly 79 years. That means it is imperative that you plan for retirement and pay into an employee pension. If you don’t, you might end up working your entire life. Self-employed individuals need to plan early and look into setting up a retirement account such as a one-participant 401(k) plan, or a profit-sharing plan from. These are both eligible for tax deductions.

2. Not Using Tax Saving Tools

Tax saving tools include funds that take several years to mature or have fixed deposits that are locked for a few years. They can provide you with tax advice and help you create financial reserves in the long term. And since in some cases you can’t touch the money, it can help you stay financially disciplined. Getting advice from a professional such as an investment advisor can also lead to a higher income tax return.

3. Failing to Seek Out the Best Insurance Plans

Inadequate insurance coverage can severely dent your savings if you find yourself in an emergency situation. It’s worth exploring all insurance solutions because there are many options out there. Maybe you want to insure your office space for accidental damages or insure your business for legal damages. Health insurance is equally important.

4. Not Planning for Long-Term Wealth Accumulation

Regardless of your age, you need to come up with a good investment strategy. As your aspirations grow, so should your portfolio. If you fail to set up the right kinds of accounts or seek the right planning advice, you won’t be making the most of your money.

Financial tools like mutual funds or a traditional pension plan can help with wealth accumulation. Even though it’s tempting for small-business owners to put all of their money back into the business, it’s far too risky. You need to diversify your assets.

5. Leaving Your Family Out of the Loop

When employed with a company, you nominate an emergency contact in case of death or health concerns. Self-employed individuals don’t have this luxury, and as a result, transparent communication with a spouse or family member is a great idea. Joint holding on investments and nominations are other options. Financial advisors can undoubtedly assist you with this.

How to Make a Self-Employed Worker Budget

In this section, we’ll take a look at a starter budget for self-employed people, considering the average income, taxes, average monthly expenses, and other consumer expenditures.

Self-Employed Worker Sample Budget

Average Expense, Cost of living or Income Per Year Amount
Annual income + $83,792
Social Security and Medicare – $6,410
Income Tax – $18,434
Health Insurance Premiums – $3,600
Life Insurance -$324
Retirement Contributions -$1,200
Rent – $19,200
Utilities and Bills – $3,600
Education -$1,250
Credit card payments – $3,600
Food – $7,300
Entertainment – $2,910
Apparel and services -$1,400
Transportation – $6,000
Total Remaining +$8,564

Financial Planning Resources for Self-Employed Workers

Increasing your skillset by taking on training in financial planning is an excellent idea if you’re self-employed. Below are some courses, books, and software that will help you make better financial decisions.

Financial Classes for Self-Employed Workers

  • Boston University’s Certified Financial Planning Program. This online, self-paced financial planning certificate program has a balanced curriculum ending in a capstone course or project.
  • Kansas State University Certified Financial Planner Certificate Program. This is a personal financial planning program that includes clinics, workshops, and professional development assistance.
  • College of Financial Planner. This course from the CFP Board covers real-world financial situations and solutions.
  • Penn State University’s Bachelor’s in Finance degree. This university offers online and on-campus degrees that provide you with great financial tools which can contribute to your financial health in your everyday life as a self-employed business owner.
  • Finance and Accounting for the Nonfinancial Executive. This is a five-day, live online course from Columbia Business School. It teaches high-level financial management and accounting skills.

Financial Planning Books for Self-Employed Workers

  • The Bogleheads’ Guide to Investing. This book is a great read for first-time investors.
  • The Total Money Makeover: A Proven Plan for Financial Fitness. The Total Money Makeover is more of a guide for people struggling with credit card debt.
  • The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. This book  will give you an insightful look into what a millionaire really is. It also features financial advice that will help you spend less than you make.
  • The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness. This text for overspenders is great if you want to learn how to stick to a budget and change your bad spending habits into good ones.
  • The Intelligent Investor. This read is intended for intermediate to advanced investors. It focuses on the philosophy of value investing, which is when investors purchase stocks that seem to be trading for less than their actual value.

Financial Planning Software for Self-Employed Workers

  • QuickBooks Online. Quickbooks is ranked as the number one accounting and bookkeeping software in the US. The online version comes in three different packages including Simple Start, Essentials, and Plus. The best accounting option for self-employed people is the Essentials version.
  • QuickBooks Self-Employed. This is a QuickBooks app and website for freelancers and independent contractors. It allows you to collaborate with accountants or bookkeepers within the software.
  • Personal Capital. This is financial planning software for both beginners and people who are experienced in money management. The free version has all the functions you’ll need for financial planning, including a robot advisor.
  • Quicken. This software comes in Starter, Deluxe, Premier, and Home and Business versions. The Home and Business option may be the best for self-employed people, as it is more detailed than the others.
  • Mint. This is one of the most popular free online financial planning tools. It’s great for basic budgeting and money management.

Meet Your Self-Employed Financial Goals in 2022

There are a wide range of paths you can take to reach your financial goals. Making annual contributions into investment funds, taking advantage of retirement plans, and learning about financial planning services are all important steps. You should also seek out tax breaks on your wealth accumulation journey.

Whether you work as a freelance web developer or own your own company, equipping yourself with the knowledge to better manage your finances will help you make decisions with confidence. In no time, you’ll be closer to achieving your self-employed financial goals.

Financial Planning for Self-Employed Workers FAQ

What does financial planning mean?

Financial planning is the continuous application of wealth accumulation techniques in order to achieve financial goals such as retirement plans, optimizing your assets, and taking advantage of tax breaks. If you’re really interested in financial planning, you may even want to get some education in the field by attending one of the best CFP programs, which stands for certified financial planner.

What is a financial planner?

A financial planner helps their clients make the most of their money and get the best possible tax treatment. They are also known as financial advisors. They have access to the resources and wealth management that will help you make more money in the long run.

Which are the best financial advisor companies?

Some of the best financial advisor companies are Vanguard Personal Advisor, Facet Wealth, Zoe Financial, Betterment, and Harness Wealth.

Should I be practicing financial planning?

Yes. If you seek professional financial and tax advice, you’ll be much more likely to achieve your short-term and long-term financial goals while remaining in control of your personal finance decisions.

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