Being a solopreneur (in this economy!) isn’t a sport for the weak-hearted.
Being a solopreneur demands you to deal with uncertainty, be best friends with ambiguity, learn to make peace with your anxiety and not let the fluctuating incomes in your bank account bother you.
For a cohort that has learned to survive the pandemic, rebuilt an economy in the shambles, and continues to live with the uncertainty of a global climate crisis, the Gen Z has truly shaped themselves to be a generation of risk-takers. No wonder this generation has a larger share of solopreneurs than any other point in history.
The journey of being self-employed is a difficult yet worthy one to embark upon. Everyone enjoys the perks of the freedom that come with freelancing, yet only a few have the resilience to bear with the ambiguity that accompanies the same freedom.
If you think about it, being self-employed is a riskier business than living the from-paycheque-to-paycheque lifestyle. The simple reason is, that there might be days wherein you’re unsure of where your next paycheque is coming from. While the certainty of your bills is bound to stay stationary, or even increase, you cannot say the same about the certainty of being able to pay them promptly. As is said quirkily – Nothing in life is ever certain. Except for death and taxes.
Being a solopreneur demands you to plan for both of these primary and a million other secondary contingencies.
Having to juggle too many tasks is never a hurdle large enough when you have million-dollar dreams and a starry-eyed vision of the world. If anything, the roadblocks you face contribute to the yearning to achieve your goals, fueling you to work harder and smarter. But life and business alike function on the concept of opportunity cost. Too often pursuing your dreams as a solopreneur comes at the cost of financial stability and ends up taking a toll on you, your company, and your bank account.
While the uncertainty that’s synonymous with being your boss is here to stay, running a business requires you to prepare for the worst.
When you’re running a business where you’re your own A-Team, budget planning becomes paramount. It has a way stronger influence on how work gets done than what we can duly account for.
In the absence of business planning, other tenets of business like marketing, product development, and sales can easily go for a toss and your business can be put in a dwindling position.
Here are ten budgeting tips you must imbibe to place a seatbelt on life as you explore your trajectory as a solopreneur.
1. Create A Sinking Fund For The Rainy Days
Running a business requires you to have a savings account, a current account, and money invested in other floating mediums. But have you ever heard of a sinking fund?
Imagine a sinking fund to be a special-purpose saving account. For the sinking fund to function, an entrepreneur deposits money intending to replace an asset or acquisition in the future. This is the kind of money you put aside for the company for things like a need-driven, non-timely mid-year hire or flight tickets to an entrepreneurship conference you had been looking forward to for a while.
What’s the catch you ask?
The money in this fund is put religiously and conscientiously and is used only for predefined purposes.
If you think about it, a sinking fund is incredibly easy to get a headstart on. However, it requires due diligence and sincerity. Many people start a sinking fund but fail to get through because they lack the discipline to set aside a specific amount regularly.
2. Try Out Means To Chart Out A Retainer With Your Regular Clients
The anxiety of not knowing where your next project-based paycheque is going to come from is real and is often pretty deafening. The ambiguity runs the risk of adding to your stress level which eventually causes your creativity and motivation to drop over time. If you’re in the creative profession, there would be days when you just won’t be able to afford the stress.
To deal with such ambiguity, a smarter way to go about things would be to negotiate a retainer with your clients and mention the package in a well-articulated quotation template. A retainer works more or less like a subscription program wherein you offer monthly services to your clients.
To put it simply, a retainer fee is an amount of money paid upfront to secure the services of a consultant, freelancer, lawyer, or other professional.
While this works out particularly well for some sectors, say content writing, social media management, and client servicing, it’s a little more difficult to sift through in areas like website development or product formation.
One way you can get more clients to hop onto a retainer model is by making your packages more attractive. Offer a few extra hours of work to your typical services, presenting an overall package to the clients which makes it more lucrative for both the parties involved.
3. Time Is Money. Keep Track Of It!
When you’ve traded the comfortable corporate cubicle for starting a business of your own, you need to realize that no asset is as precious as your time. While budgeting your money is paramount, you also need to learn to be cognizant of the kind of time you’re spending on each of your projects.
Very often solopreneurs end up spending weeks on end on a project that would only give them enough money to last a few days. Not only is such a decision fiscally irresponsible, but is also likely to disjunct you from the kind of work you want to offer to the client at hand.
Avoid giving in too much of your time to projects that do not bring you equal amounts of money or contentment. A good way to go about this is to analyze your schedule a week in advance, observe the amount of time and effort you are devoting to each client and make amends as needed.
There are a bunch of time-keeping applications on the internet that allow you to track how you spend your workday. Some of these include Toggl, Clockify, and Due Time Tracking.
4. Get Disability Insurance
When you’re in your own company, personally and professionally, it’s hard to afford to fall sick. Because a sick leave would probably mean an inability to work, which eventually translates into less money to get by the day.
As its name suggests, disability insurance is a kind of insurance product that provides an income if a policyholder is prevented from working and earning an income due to a disability.
Disability insurance provides you with an income in case you face an accident or illness that doesn’t let you work. This income prevents you from going into debt by covering your basic expenses while you’re stuck to the bed and cannot make it to work.
When getting an insurance policy, make sure you get one with an own-occupation rider. Sans that, your insurance company has the right to refuse to pay your benefit if it feels you can earn money outside your current occupation.
5. Invest In An Accountant
Once you’ve leaped to start a company, you must also take the leap of finding an accountant. Get an accountant that really understands the grain of you and your business. Money and tax questions can feel intimidating after a point.
Chances are that with the plethora of deadlines that you’re working with you might miss a tax filing date or two. And that indignance comes expensive.
Having someone in your corner who can guide you through the credits, debits, and tax filings can save you a considerable amount of money.
Getting a smart accountant that you can trust truly is a gift that keeps on giving. Make sure you trust your accountant with the nitty-gritty of your business and you’re likely to save as much as you spend.
6. Plan A Date: Put Budgeting On The Calendar
Considering how overwhelming the task can get, when you do not have a boss supervising you, you’re likely to put off budgeting for as long as you can. This is a recipe for disaster.
It’s incredibly easy to procrastinate these tasks, but they’re awful in terms of their consequences- both, for you and your business.
Set time aside every month to plan your money cycle, your expenses, and anticipated incomes. Put a budgeting date on your calendar, and do not budge from it. The temptation might be high, but life will eventually teach you to resist it.
7. Save Up For Your Retirement
This is a piece of textbook advice that never gets old. Life is uncertain. Plan taxes first, retirement second.
While it’s tempting to look for a number, or even a ballpark figure to guide your retirement saving options, there isn’t one.
“As much as you can” is the standard advice for saving up for retirement. Some financial planners recommend that you save 10% to 15% of your income for retirement, beginning somewhere in your mid-twenties.
However, the percentage of your income that you can save, depends, well, on your income. And as a solopreneur, that figure tends to fluctuate. Make sure you have a savings target and divert conscientious efforts into bridging the gap every month.
8. Do Not Put Off Paying Yourself
The basics of behavioral psychology tell us that humans run on incentives. While being a solopreneur requires you to do a plethora of non-human things, not rewarding yourself for work isn’t one of them.
It is very common for freelancers to get a cut from their earnings.
In the corporate world, company owners pay everyone before themselves. Big MNCs are held accountable for their employee’s incomes.
A solopreneur’s inability to cash in a cheque for themselves is often rooted in questions about self-worth and paralyzing feelings of self-doubt.
As a solopreneur, you need to understand that paying yourself first doesn’t mean letting other commitments and responsibilities slide. It’s an organizational technique that will make sure that your paycheck is correctly issued and stays in your pocket. As it should.
9. Investigate And Determine Your Minimum Income
Once you’ve gotten the groove of freelancing or have successfully stayed afloat after one year of being in business, you are likely to have an idea of what your minimum income looks like.
Your minimum income is the absolute minimum of that income that you made per month.
When you have enough data to standardize, you can begin analyzing which months are the most and least profitable in business. This analysis allows you to think ahead, plan forward and anticipate the potential slumps in your industry of concern.
This tip kind of works like devising a worst-case scenario and ensuring that even in the worst situation possible you somehow manage to stay afloat. It’s a horrible exercise. However, take it from me, it is worth it.
10. Level Up Budgeting – Make Two Budgets
If you and your business are ready to take the next step, begin with your budgeting plans. Create dual budgets – one that is a reflection of your current level of income and another that is your aspirational budget. An aspirational budget provides you with an impetus to increase your earning power. There are two benefits to an aspirational budget
- It inspires you to pursue highly valued clients and take on new jobs.
- It also encourages you to cut costs wherever you can.
The solopreneur journey is a half and half mixture of surprise and stress. To make sure your journey is as fulfilling as it is bumpy, you might want to fasten your seatbelt with these budgeting tips as you negotiate a path for yourself in self-employment work.
As a one-person brand, you’re likely to face budget challenges unique to your industry and your skillset. It helps to make sure you are equipped with the right strategies to face them.