Financial Planning Tips for the Self-Employed
There's nothing quite like being your own boss: you can set your own schedule, work when you want and for how long you want, all the while keeping the focus on your own vision and goals. However, managing your finances can also be a struggle, especially when you just want to focus on the work at hand. Fear not, self-employed! You are not alone when it comes to making the jump.
This was based off of a piece from Investopedia that discusses two of the major areas that self-employed individuals overlook, namely because big employers would take care of these for you: retirement planning and insurance.
Even if you are self-employed and think you will work right up until the day you die, you're still going to need money (more of it) the older you get. According to a survey by TD Ameritrade, there are currently more than 10 million self-employed Americans, a 14% increase since 2001. While the spirit of entrepreneurialism is to be applauded, less laudable is the fact that a substantial 40% of self-employed workers save for retirement only sporadically; by contrast, just 12% of traditionally employed workers are sporadic savers. Scarier still, 28% of the self-employed, versus 10% of traditionally employed workers, say they aren’t saving for retirement at all.The reasons given for not saving towards retirement won’t be a surprise to anyone who is self-employed. The most common include:
Lack of steady income
Paying off major debt
Excuses aside, this planning process cannot be ignored. There are a variety of savings options that are preferred by the self-employed, which include: Solo 401(k)s, SEP IRAs and SIMPLE IRAs. We will discuss these more in the coming weeks as well, so stay tuned.
Not having health insurance can be a huge burden to you and your family, so when you're responsible for paying for your own health insurance it's a step that should never be skipped. Disability insurance is vital too: it may not seem like a big deal, but if you can no longer provide for yourself you can be assured your income can be supplemented to pay your bills and depending on your profession the cost of insurance can be affordable.