Like a boss: How to go freelance or self-employed without going broke

By Mike Narouei, Content Producer at Boring Money

22 Jan, 2019

To help us launch our brand new Money Tribe – Annoyed Self-Employed – we put out a call to arms. Like a general blowing his horn to assemble the troops, we rallied together financial advisors to send their best tips. So, in the first of this week’s ‘Like a boss’ series, we’re sharing hand-picked tips for the start of your self-employed journey – from making a business plan to facing the taxman.

Begin with a rock-solid plan…

- “My advice for anyone self-employed is: Create a spending plan and know your numbers. It’s a big mindset shift to go from being handed money automatically each month to you controlling what and when you earn. So be clear on what you need to earn and clear on what you spend.”

Catherine Morgan, Financial Coach at The Money Panel

- “Stay away from being the cheapest in order to win business and know your competitors as well as you know your own business. This then has implications on everything else… cashflow, tax, etc.”

Vanessa Audsley, self-employed advisor at Vanessa’s Financial Advice

…but prepare to take a chisel to it

- “When it comes to your business and pricing structures, these can be changed further down the line. In fact, adapting your pricing structure is quite common for those starting out in business. Quite often, start-ups will encounter hurdles within the first few months or even years, so it is wise to plan for initial failures and come up with solutions, so they can be fixed quickly with minimal risks involved.”

Flora Maudsley-Barton, Managing Director at Parsonage Financial Planning

Have backup funds in place for unexpected costs

- “Because of uneven cashflow and managing things like late payments it’s vital to ensure you have built up a sufficient cash buffer. This should be separate to your ‘rainy day’ fund that is there for emergencies like when the roof blows down. This secondary cash buffer should be utilised to help pay for all the essentials when cashflow goes through its ups and downs. If you don’t have this in place or aren’t sure how much you need, consider setting up a separate savings account that is easily accessible and try to save regularly to build up roughly 2/3 months of essential outgoings. Hopefully your cashflow won’t need supplementing for longer than that, but if it does you might want to save more.”

Krupesh Kotecha, Financial Planner at Balance: Wealth Planning

On your marks, get set, chase those invoices!

- “Anyone who is self-employed should learn their regular monthly outgoings as quickly as possible so they can forecast for the rest of the year and understand their financial situation on a monthly basis. Regular income is key and prompt invoicing can help keep things in check – in this business age, clients often recognise this as normal practice and it will help to ensure payment is received in a timely manner.”

Flora Maudsley-Barton, Managing Director at Parsonage Financial Planning

Started reeling in the dough? Go easy

- “Set it and forget it. The best way to take the emotion out of money is by automatically setting aside cash from each pay cheque to go into a savings or investment account. A monthly deposit can help you keep on track and is money you won't miss but will be thankful for later!
- “Also, turn savings into a game by providing incentives when you meet your budget or savings goals. For example, pick an attainable number for your retirement savings and then reward yourself quarterly with a treat (like a nice dinner out or that pair of jeans you've been coveting) if you meet your target.”

Brian Byrnes, Investment Advisor at Wealthsimple

Oh yeah… and don’t forget the taxman

- “It’s also important to remember self-employed workers are responsible for paying income tax and national insurance through an annual self-assessment tax return. So any newly self-employed person must register they are self-employed, regardless of how much by October 5 in the second tax year of being self-employed. The tax year runs from April 6 to April 5.”

Jon Greer, Head of Retirement Policy for Quilter

- “The 30% rule is your greatest ally. Don't get too starry-eyed when you see your first freelance pay cheque because remember: taxes aren't taken out. A general rule of thumb is to stash away 30% of each pay cheque in anticipation of the taxes you'll have to pay when filing your self-assessment by January 31.”

Brian Byrnes, Investment Advisor at Wealthsimple

When it comes to tax, we were overwhelmed by how many money folk wanted to share their advice with you. To find out what they all had to say, check back in tomorrow for the next instalment of Like a boss: a financial crash course for the self-employed.

Now delve into the detail

For more free self-employed financial advice – including business banking, mortgages and pensions – check out our brand new Annoyed Self-Employed learning path.