As a self-employed business owner, it can often feel like you have a very different way of acquiring wealth compared to those with a regular salary. However, there is no reason why you cannot work to a position where you are able to start your savings. Here are some of the things that you should look into if you want to boost your savings as a self-employed business owner.
Pay Yourself a Salary
When you have an income coming in as revenue from the business, it can be a bit difficult to manage properly. You need to make sure that you know how to divide it up and get it to where it needs to be.
It can be difficult to work out where revenue can be divided properly at first, especially if there are expenses within your business that need to be paid. One of the best things to do is to make part of the business’s money into a salary for yourself. This allows you to create a set amount that you will be paid each month. This should make money management within your business that bit easier, but it also has some benefits for your personal life too.
With a set amount of money coming in each month, you will be able to manage it much better. Whether you have a strict savings plan that puts aside a little bit each month, or you just want a little extra cushion to your spending, you will hopefully be able to do so here. Paying yourself a salary is one of the easiest ways to ensure that you are getting an income without getting tangled up in some of the other costs of your business.
Establish a Retirement Account
A business won’t last forever. Even if yours proves to be incredibly successful and you are able to hand over the reins to someone else rather than simply close things down, you are going to be left with a reduced income compared to what you might have been on prior to your retirement. For this reason, it is best to assume that you need to have some way to continue drawing money once you have retired.
A great option here is to set up a self employed retirement account. This means that you will be making payments alongside your regular standard and building up the amount that you need over the years. The SEP IRA is a great choice for those who are self-employed as it allows you to contribute as much as you want each year up to the limit set by the IRS. This can really help you to set what you want in terms of savings – meaning that you will then be able to potentially build up a retirement fund that is larger than the base minimum.
Tools such as a retirement account will always be beneficial as they can be set up as automatic payments. This means that the money will leave your account straight away with little intervention from you. It is worth tracking this expense so you know what is going where, but there is every chance that you will be able to send it out without it making too much of an impact on your spending.
Have a Budget
While many of the calculations and division of money might happen within your business, you need to make sure that you are budgeting correctly once your money has been paid to you as a salary. So many business owners will have a good budget laid out for their company to follow but won’t have the same discipline when it comes to their personal lives. You need to make sure that you are able to account for the money in your salary just as if you were an employee at another company. The money that your business makes belongs to the company, not to you personally, which means that if you run out of funds in your personal life you can’t go reaching for the purse strings of the company. To do so could land you in some serious financial trouble.
There are so many options out there if you want to create a comprehensive budget that covers many different parts of a living expense. One of the most popular is the 50/30/20 rule, which sees you divide your salary into expenses, savings, and disposable income. If your goal is to build up savings, using a solution such as this will always be the best move to make.
Take the time to sit down and work out what your budget is and where some of your biggest expenses might be. There are plenty of places where you could be spending more than you ever expected. A regular review of your budget and spending will help you to track these issues as they occur, and it means that you will be able to make adjustments as they are needed. You need to make sure that you regularly monitor your expenses if you want to be a successful saver.
Take It Slowly
It can be a little frustrating to sit back and wait for savings to begin to build themselves up. However, you have to appreciate that you might not always be able to add a lot to your savings pot each month. This can mean that it does appear like nothing much is happening when you could actually be well on track to creating a good set of savings for yourself plus gaining the ability to make sensible financial decisions.
It is always a good idea to have a goal in mind when saving, so you can give yourself a little motivation to save rather than spend. Whether you want to buy a house, a car, or even just have a good pot for retirement, there are several options that you can choose from.
Being self-employed does not mean that all of your money has to get poured into the business. Work out a viable way in which you can put savings aside and implement it today.