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Manage Your Cash Flow
What do online entrepreneurs, freelance writers, real estate agents, virtual assistants, and plumbers all have in common? We face periods of uneven cash flow. To ensure that you always have money reserves, be sure to develop a budget that allows for swings in your income. Begin by determining an average of how much revenue you know you can count on each month and use that as a base for monthly expenses. During months that you earn more than this base, resist the urge to spend beyond your budget and make sure that this money gets safely transferred to an interest earning savings account or money market account. It is also a good idea to begin your budget by paying yourself a set salary each month, if possible. Many banks these days offer free checking so be sure to keep your personal and business cash in separate accounts. You have no idea how this will simplify your life at tax time.

Pay Your Taxes
As an employee, you receive a Form W-2 detailing your income and the amounts your employer paid out for federal, state, Social Security, and Medicare taxes. As an independent contractor, you will receive a Form 1099-MISC from every organization that pays you $600 or more during the tax years. Since no taxes were withheld, it falls to you to calculate the amount that you will owe and make sure that this money is safely stashed away in a savings account. This is a good time to invest in a good tax software program such as TurboTax. Don’t overlook the fact that you will also have to pay your own Social Security and Medicare taxes. Use Tax Form Schedule SE to calculate these amounts. I strongly advise that you hire a personal tax advisor to help you determine what your business deductions are and how to contribute to retirement plans.

Prioritize Insurance Planning
As a self employed entrepreneur, or contractor, it is up to you to provide your own health, disability and life insurance. It is a sad fact that many self-employed people forego this important financial safety net, fearing that they simply can’t afford it. Do not make this mistake! At the very least, you should have enough coverage to protect yourself against potential loss of income due to illness or disability. You may also need to consider boosting your home insurance coverage or purchase liability insurance if your office is home based. Again, speak with your licensed financial advisor, accountant, or insurance representative to determine how much insurance coverage you really need.

Invest in Your Future
The government affords the self-employed many generous advantages and it is never too early or too late to begin saving for retirement. Again, take the time to sit down with your financial advisor. Ask about retirement accounts for business owners, including the traditional IRA, Roth Ira, Keogh plan, and Simple-Ira among others.

Working for yourself can be one of the most exciting and rewarding things that you will ever do. It can also appear overwhelming and challenging if you don’t have your finances set up properly from the beginning. By creating a comprehensive game plan you will ensure many years of economic security and business success.

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