If you’re self-employed, managing your finances can seem like a nebulous task that only gets more challenging the longer you go without paying attention to it. You might not know where or how to get started when you’re first getting started. After all, financial planning for self-employed workers looks different than it does for salaried employees.

However, you can untangle your finances and get organized with a few smart money moves. Learn more about the basics of financial planning for the self-employed with these top six tips to help you get started on the right foot.

1. Keep Business and Personal Finances Separate

It can be tempting to intermingle your business and personal funds. After all, it’s still your income, so why not keep business income in your personal bank account?

The problem is that mingling your personal and business transactions will make your end-of-year taxes a nightmare. Separating your different expenses makes it much easier to keep track of write-offs. It’s also an easy way to see your business’s available funds at a glance, so when you are doing financial planning for the future, you know how much you have available for a new business investment or purchase.

The easiest way to divide your personal and business accounts is to set up different bank accounts for each. Make personal purchases with a personal debit or credit card, and business purchases with a business debit or credit card.

When you inevitably go to the store to buy a mixture of business and personal items, divide them into separate transactions on the conveyor belt. Your cashier can run them as two separate transactions, giving you a receipt dedicated solely to business purposes for your records.

Remember to keep those receipts in case you can deduct them from your taxes at the end of the year!

2. Track Your Time

Maintaining a healthy work-life balance is crucial for your mental and physical health. You need time away from your work to rest and recharge, but it’s more than that. You should be tracking how many hours you spend on work each day, whether it’s for hourly work or fixed-price work.

Time is money, as they say, so planning your time and planning your finances are essentially one and the same. Tracking your time helps you set accurate quotes and estimates for future client work. You will know exactly how long something takes and charge enough to be fairly compensated for your efforts.

This also allows you to spot which clients are the best value for your time and which ones you might be undercharging. The result is a more profitable business all the way around.

3. Pay Yourself a Consistent Amount

Every dollar that comes into your business technically belongs to you, but there is something to be said for giving yourself a regular paycheck.

Self-employed individuals should budget business funds and set up a consistent “paycheck” that transfers from a business bank account to a personal one. Knowing how much money you have coming into your account allows you to stay more organized and create a more effective budget.

Not to mention, this regular source of income can play a major role when you obtain financing for your next important purchase. Banks like to see regular income and deposits before they will approve you for a loan or a mortgage on the personal side of things. While it can be tricky to qualify for these if you are haphazardly paying yourself, regular paychecks look more reliable to lenders and make you a more favorable borrower.

4. Plan for Taxes

No financial planning strategy for self-employed workers is complete without touching on tax planning.

One of the downsides to being self-employed is that you will be responsible for both employer and employee taxes. You will have to cover the cost of social security and Medicare benefits, but your tax responsibility is not automatically deducted from your paycheck as it might be with a more traditional employer.

Instead, you must pay quarterly taxes to the IRS to help offset what you will owe at the end of the year. You may be required to pay a penalty if you owe too much.

However, there is one way that you can minimize what you owe to the government at the end of your fiscal year: tax deductions. Business owners may qualify for additional deductions that will minimize their profit for the year and reduce out-of-pocket taxes.

Consulting with an accountant can help you spot deductions that standard salary employees don’t get, like home office and other business expenses like equipment or tech.

5. Get Insurance Coverage

If you do not have the option to pick up health insurance through a spouse’s employment, you may need to browse your options. Private health insurance or a plan picked up through insurance marketplaces can sometimes be expensive, but you have lots of options to choose from.

The good news is that if you decide to pick up health insurance through your own business, it counts as a business expense and you can deduct the premiums.

6. Plan for Retirement

Last but not least, it’s absolutely essential to plan for your future. Even if you love being an entrepreneur and owning your own business, most people do not want to work for the rest of their lives, so financial planning for retirement is a necessity.

One of the best retirement plans for business owners is the Solo(k). As both an employee and employer at your business, you can essentially contribute to your Solo(k) retirement plan twice.

• Some of the benefits of having a Solo(k) include:
• Roth contributions
• Catch-up contributions of $7,500 for those age 50 and over
• High limits on contributions
• Employer contributions at 25%
• Ability to take out loans against your Solo(k)

Setting up and managing a Solo(k) on your own can be challenging and time-consuming since it requires paperwork, tax forms, and fund management. With Retire4one, we make things simple with an easy one-stop shop for all your Solo(k) needs. Thanks to our partnership with Voya, your Solo(k) can even have all the benefits of a large employer plan.

Set up everything online in just 3-5 minutes, so what are you waiting for? We make it easy for busy business owners to manage their Solo(k) options and start looking toward a bright and financially stable future.