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How To Navigate The Financial Challenges Of Being Self-Employed – A Beginners Guide

Written by: Joanna Stokes, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.

 

The uncertainty and unpredictability of self-employment can be stressful and anxiety-provoking for many people ‒ especially when you think about finances. Not being able to “afford” to move into self-employment is one of the most common reasons I hear from my network for not taking the leap.

portrait of smiling woman sitting on couch.

In this article, I identify a few common fears people may have and share my experiences from the last 2 years of moving into self-employment of how to mitigate them.


Common fears:

  1. Financial insecurity: The fear of not having a steady income can lead to worry about being able to afford basic necessities, e.g., Will I be able to pay my mortgage and my bills?

  2. Lack of stability: Without a regular salary, you may feel unsure about your financial future, and fear not being able to plan for long-term goals such as retirement.

  3. Difficulty in budgeting: You may be uncertain about how to budget and manage your money without a steady income stream.

  4. Uncertainty of the future: Not having a regular salary can make it difficult to predict how much money will be coming in, making it hard to plan for the future.

  5. Limited access to benefits: Self-employed individuals may not have access to benefits like health insurance, pension plans, and paid time off that are provided by traditional employers.

I felt all these fears.


They are real.


However, whilst it's important to remember that self-employment can be challenging, with the right mindset and proper planning, it can also be very rewarding. This is what I have learnt over the past 2 years.


These are my top 10 ways of overcoming your financial fears:

  1. Create a budget: I know how much I need to pay my bills in both my business and personal accounts. It's easier to plan to know what my minimum income has to be.

  2. Pay yourself every month: Giving yourself a salary is a way of having consistent income every month but it also makes it all worthwhile!

  3. Separate business and personal expenses: Open a business bank account (I use the online challenger bank Tide) This makes it easier to track expenditures and plan for tax.

  4. Consider using an accounting software: I use Quickbooks Self Employed. It makes everything so much easier and takes up minimal time as it’s linked to my business bank account.

  5. Set aside a contingency fund: Set aside money in a savings account to cover emergencies and low-income periods. I always have at least 6 months' salary in my savings account and I never touch it. This gives me peace of mind and stops me from worrying about lower-income months or if I couldn't work because I was sick.

  6. Increase your earning potential. Consider ways of diversifying your income, increasing prices and finding new clients.

  7. Get insurance that covers your risks such as liability insurance and health insurance.

  8. Seek out support and resources; there are many resources and support networks available to self-employed individuals, such as business associations, networking groups and financial advisors. I am a member of a community which provides me with both support and resources including monthly sessions on all things business.

  9. Make a financial plan and set goals. This can help you stay motivated and focused and gives you a sense of control over your financial future. I decided that each year I would pay myself a bonus depending on how well the business had achieved. I decided at the end of my first year that if I had a good year financially I would buy my first Lucy Pittaway piece. I now have my favourite picture over my fireplace and it makes me proud every time I look at it.

  10. Be prepared for the ups and downs: Self-employment can be unpredictable, so it's important to be prepared for slow periods and to have a plan in place to manage them. I work like a mad woman from October to April but then it slows down over the summer. I have learnt to plan for this and enjoy my slower months to plan and develop myself and my business.

It’s important to remember that self-employment also has many benefits such as flexibility, creativity, autonomy and many more, but it’s important to address these financial fears and take steps to mitigate them.


With proper planning and a proactive mindset, self-employment can be a path to financial success and personal fulfilment. I am a testimony to that!


If you want to learn more about my journey from full-time employment to self-employment then read my other article Top 10 tips to becoming self-employed


Follow me on Facebook, LinkedIn, and visit my website for more info!


 

Joanna Stokes, Executive Contributor Brainz Magazine

Joanna Stokes is transformational leadership and career coach and a trainer and mentor to further education leaders. She has 18 years of experience in Further Education, and the last 8 years as a senior leader in a variety of organizations including the CEO of an adult education charity. She was an Ofsted Inspector for five years. After experiencing the powerful impact coaching had on her career, her mission is to spread the power of coaching across the sector. She coaches education professionals and trains workplace coaches and mentors. She qualified as a personal performance coach in 2020 and is now on a mission to help education professionals create the freedom to live the life they want.

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