Self-employed individuals are getting higher off the ground and taking charge of their finances. It’s easier said than done. Self-employed people endure to their own devices in a matter of taxes, healthcare, and retirement.
That said, it’s a challenge but not an impossible task. If you’re thinking of going into independent work, these financial challenges for self-employed individuals need to be considered and addressed.
Regardless of your financial situation, we can steer you on track with expert advice from our team. Keep reading to learn how to tackle these financial challenges.
1. Difficulty Securing Funding
Banks and other financial institutions often view self-employed individuals as higher-risk borrowers. As a result, it can be hard to qualify for a loan or line of credit. One way to overcome this challenge is to work with a specialty lender that focuses on loans for small business owners.
Another option is to develop a strong business plan and financial projections that will convince potential lenders of the viability of your business.
2. Managing Their Cash Flow
Without a regular paycheck, it can be hard to predict how much money will be coming in and when. It is hard to budget and save money.
There are a few ways to overcome this challenge. One is to create a monthly budget and track your expenses carefully. It will help you see where your money is going and make adjustments accordingly.
Another way to improve your cash flow is to invoice clients promptly and follow up on payments. It can be a challenge if you are busy running your business, but it is foremost to stay on top of it.
3. Paying Their Own Tax Liability
Paying their tax liability is one of the challenges of being self-employed. They must withhold and pay their income tax and social security, which can be a significant financial burden.
There are a few ways to overcome this challenge: Stay organized and plan. Self-employed individuals should track their income and expenses to know exactly how much they need to withhold for taxes. They should also set aside money each month to ensure they have enough to cover their liability.
4. Set Up Savings to Overcome Financial Challenges
One of the biggest financial challenges that self-employed individuals face is saving for retirement. It can be hard to set aside money for retirement when you don’t have a regular paycheck coming in. One way to overcome this challenge is to set up a retirement savings account and make regular contributions.
Another financial challenge of self-employment is paying for health insurance. It can be a significant expense, but there are a few ways to offset the cost. One way is to join a health insurance buying group.
There are financial tools available online to assist self-employed in how they can cope with the challenges.
The Final Challenge
To overcome the financial challenges self-employed individuals face, you need to be proactive and organized with your finances. By being mindful of your personal finances, you can overcome the challenges of being self-employed.
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