Being self-employed is both a blessing and a curse in disguise. As freeing as being able to determine your own hours and when you take holiday is, the security of having a salary is also taken away. This can be scary when considering how to plan for the future or ensure your financial security for the future. If this sounds like something you’re concerned with, keep reading to find out how to future-proof your finances if you are self-employed.
Take note of the pension gap
When you’re self-employed you’re not covered by any auto-enrolments that were introduced a decade ago, meaning you’ll have to make the decision to start actively saving for your retirement on your own.
The good news is that it’s never too late to start saving. There are multiple investment choices you can choose from as well as online calculators to help you work out how much to put back each month etc.
Educate yourself on your state pension entitlement
Recently it was announced that anyone who reaches the state pension age and has paid enough into their national insurance contributions would receive a state pension of just under £160 per week. Although this is a decent amount, it’s unlikely that this alone will enable a comfortable retirement – just something to be aware of.
Protect yourself and your loved ones
Another drawback of being self-employed is that you won’t have access to sick pay when you most need it. Because of that, it’s worth looking into things like company life insurance so you can ensure some comfort if anything does happen to you.
There are a range of other protection packages you can look into to ensure protection for yourself and your loved ones, too. Nobody wants to think about this but it’s important to do before you find yourself in an unfavourable and difficult situation.
Look into keeping your finances flexible
Although the idea of putting your capital at risk can be quite daunting, having different earnings each month can take quite the toll on you anyway. Stocks and shares ISAs are a popular option for those who are looking to make savings and are comfortable with letting their money increase and decrease throughout the year. Others prefer ISAs as a complement to pension savings because it gives them instant access to savings should they need it.
Level up on taxes
Yet another challenge that salaried individuals don’t have to worry about is tax. Having to put aside money each month to pay a tax bill can be made easier by taking advantage of online calculators that help to do the maths for you – quite literally.
A helpful piece of advice is to put your savings into a separate account to stop you dipping into it. This way, you’ll also have more money when it comes time to make the dreaded tax payments. You may not know that the money you save into a pension could reduce your tax bill. Tax relief pensions work in such a way that you end up paying less higher rate tax.
And there you have it – just a few simple tips for ensuring your finances are all sorted for the future when you are self-employed.
Review How To Future-Proof Your Finances If You Are Self-Employed.