Despite careful budgeting, cash cushion building and prompt invoicing, the due diligence of some of us will not be enough to avoid the squeeze of solopreneurship.
Everything from past- due payments to seasonal slowdowns can result in unexpected cash flow interruptions. Cycles of feast or famine can perpetuate the stress of paycheck-to-paycheck living.
To survive and thrive in the midst of this volatility, the adage 'expect the unexpected' is a mandate. It doesn’t matter how many thousands of dollars are on the way, if none of them are in your bank account when it comes time to pay your quarterly tax bill.
Here are four ways solopreneurs can begin creating a framework for financial security, even without salary certainty.
* Calculate your make-or-break number.
When you have a clear metric for covering your basic operational costs, it offers a threshold for how much you need to earn as well as a gauge for other spending, savings and reinvestment goals.
Subtract your make-or-break number from your previous month’s income to calculate how much you can afford to spend on discretionary expenses.
* Don’t mix business and personal accounts.
Making a couple of hundred bucks on the side might not feel like much of a business for a freelance writer. But it should still be treated as such. Set up separate business accounts to keep self-employment or side-hustle income and expenses separate from personal ones.
In addition to simplifying accounting cum tax time, this separation can help cultivate a critical solopreneur mindset: Revenue does not equal income!
* Build a buffer.
Expecting the unexpected requires a healthy cash cushion for managing cash flow interruptions—separate from personal emergency savings.
While building this business savings buffer, solopreneurs should also look ahead for potential business slowdowns and put backup plans in place.
* Be your own human resources department.
Switching over to self-employment also means becoming self-reliant. With no HR department to set up your health care or employer to match your 401(k) contributions, solopreneurs have to take the reins of their own long-term well-being, and treat it as seriously as any other aspect of their business.
After all, the only way to thrive in the YouEconomy is to take the long view and plan accordingly.
Courtesy: www.success.com
