How I Deal With The Financial Uncertainty of Self Employment

To say that I’m a bit of a worrier would be like saying that the pope is a bit of a Catholic.

In any given week, I’m likely to worry that I’ve left the iron on, that something I said a fortnight ago might’ve offended someone I don’t even know, and that I borrowed a library book ten years ago and didn’t take it back. I’ve even been known to worry about the fact that I’m not worried.

So the fact that I’ve managed to ride the rollercoaster of self employment for more than seven years is quite astounding, actually.

Because here’s the thing… Working for yourself, and a degree of financial uncertainty, go hand in hand. There’s no employer giving you a pay packet at the end of the month. There’s no safety net of holiday and sickness pay. There’s no one other than yourself who can ensure that your mortgage is paid and there’s food on the table.

You could argue that being self employed and having multiple sources of income is less risky than relying on a boss in a traditional job, and I’d agree. But still, even if business is booming and you’re smashing your targets, even if you’ve just had your best month yet, I believe that there are very few self employed folks out there who don’t worry, to an extent, about money.

What’s important is that you’ve got mechanisms in place that mean that the uncertainty doesn’t eat you up, and that you’re never just one bad month away from having to admit defeat. This is how I deal with the financial uncertainty of self employment…

I HAVE A BUSINESS EMERGENCY FUND

If you’re thinking about quitting your job to go it alone, then anyone with a tiny bit of common sense will tell you that it’s wise to have some money behind you to cover your living costs for a set amount of time. Some say six months, some say twelve.

Personally, I had around three months of income from my full-time job saved up, and given the fact that I was prepared to seriously rein in my spending for a while, and based on my own circumstances back then, this was sufficient in terms of both practicality and peace of mind. Your own figures will vary depending on factors including your financial commitments and just how much risk you’re comfortable with.

Knowing that I had that sum sitting in my bank account to help me to make ends meet took away a lot of stress during the early days. It gave me so much peace of mind that I committed to always keeping a similar amount of money in an emergency fund, even once my business became more established and my earnings were reasonably consistent each month.

I KNOW MY LOW HANGING FRUIT

There are certain things that you’ll do in your business that are all about playing the long game. They’re about building things up from scratch, creating assets that you can monetise further down the line, and skipping the instant gratification in favour of knowing that you’re doing something for your future self.

Take blogging, for example. This ain’t an overnight thing. These long term strategies for diversifying your income are definitely important, but they’re not particularly helpful if shit goes pear shaped, for whatever reason, and your bank account needs a quick cash injection.

I get a huge amount of peace of mind from knowing that if I needed them, I’ve got some tricks up my sleeve that would allow me to hustle up a chunk of money in a reasonably quick timeframe. I could reach out to previous copywriting clients with an irresistible offer. I could get stuck into matched betting. I could run a sale on a virtual product that I’ve already created, like my copywriting course, and promote it to my email list. I could hit the charity shops with £50 in my pocket, and realistically flip that into £200 pretty fast.

These aren’t all necessarily things that I’d be doing on a day-to-day basis when things were going swimmingly and I was focusing on my long term plans, but they’re there if I need them. Knowing your low hanging fruit just means that you’ve got a back-up plan.

I’VE CREATED PASSIVE INCOME STREAMS

The definition of ‘passive income’ has become a bit washy washy. You could fairly say that unless you have cash coming in that requires absolutely zero work or maintenance on your behalf, it’s not actually passive.

In practice, there are very few things that are going to tick that box. But really though, the point is this… What would happen if you were ill and had to take a step back? What if you had to take time off to care for a family member? What if you just fancied a holiday?

My own version of passive income streams are in the form of a monthly membership programme that I run, that eats up only about one day of my time each month, and affiliate and advertising commissions that come via content that I’ve already created. These took time to build, but they’ve put me in a position where whatever happens, I can cover my bills and living expenses each month.

I’VE BUILT RECURRING REVENUE

If you’re starting from scratch every month when it comes to hitting your income targets, then it can quickly become absolutely bloody exhausting. It’s a treadmill you never jump off. But there are plenty of ways in which you can build a pot of recurring revenue and create a baseline of money coming in at the start or end of each month.

In an ideal world, you can get to the stage where your recurring revenue allows you to hit your income targets, meaning that everything else is a nice little bonus.

As a freelance writer, I’ve got clients on retainer contracts, which essentially means that they’ve pre-booked a set amount of hours of my time in advance each month and pay accordingly. If you’re a blogger, for example, then you might be able to consider forming longer term collaborations with brands, rather than working on one-off sponsored posts.

I PUT CASH ASIDE FOR MY TAX BILL

When you work for someone else, your tax is generally taken at source, so your entire paycheque is yours to keep. This doesn’t apply when you’re self-employed. It’s your responsibility to file your tax return and then pay a chunk of your income back to the tax man.

It might all sound like common sense, but it could be extremely easy to get yourself into a right old pickle with this if you’re not careful. I earmark a percentage of my earnings each month to put aside for my tax bill, so I’m not faced with a massive panic and the prospect of having to pull money out of thin air once the deadline comes around.

As a side note here, I’d strongly recommend using the services of an accountant, even if you’re completely new to running your own business and you’re not expecting to be raking in hoards of cash any time soon. It can be much more affordable than you probably think, and my own accountant manages to legally save me way more than he charges me every year. It’s one less thing for me to worry about, and it’s great to know that everything’s in order, and that it’s been handled by a professional.

I’VE TRAINED MYSELF TO THINK LIKE A BUSINESS OWNER

I’ve learned that the thing you do isn’t any more important than your role as a business owner. Let me explain what I mean, with an example… Say you’re a freelance writer. Of course you need to be good at what you do and deliver great work to your clients. But that in itself really has no bearing on your success. If you’re not on top of invoicing, and record keeping, and client attraction, then it’s very likely that sooner or later, you’ll find yourself up shit creek without a paddle. 

Being a business owner needs to take priority. It’s what will make sure that you’re in control of your cashflow and can anticipate problems before they get out of hand. Especially in some creative entrepreneurial fields, there’s a tendency to want to play up to the image of a starving artist. You’re doing the work for the love of it, and that’s all that matters, and being a bit skint is just part and parcel. Except, it’s really not.

For me, being a business owner sometimes means deciding to not be romantic about the things that aren’t working, and dropping them. Sometimes it means a day tied to the desk, organising receipts and filling out spreadsheets. Sometimes it means having to have difficult conversations with clients who haven’t paid. It’s not necessarily fun, but it’s what ensures that you’re building something that can be sustainable for years to come.

Like I’ve said, a little bit of worry is normal, and to be expected. But when you take steps to actively manage how your business creates and sustains income, you can put yourself in a position whereby you don’t have to seriously stress each month about your bank account. 

If you’re starting your journey to become self employed and you could do with a little support along the way, come and join my free 7-Day Money Making Bootcamp. You’ll get access to an email course that’ll help you to plan your income streams, diversify your money making strategies, and you’ll also get access to our Facebook group, where you’ll meet likeminded folks with similar goals.

I am taking part in the Monday Money linky with Lynn from Mrs Mummy Penny, Faith from Much More With Less and Emma from EmmaDrew.Info

 

 

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