Money Matters
When you become self-employed, you join millions of other entrepreneurs who are striving to make their ambitions a reality. However, navigating the murky seas of self-employment may be difficult, especially in the beginning stages.
While there are no guarantees in business, there are some tactics that can improve your chances of success, particularly financially. Here are some blunders you should avoid as a self-employed individual.
The Role of Delegation and Prioritization in Sustainable Success
Self-employed individuals often act as stunt doubles in their businesses due to budget constraints. However, Ronne Brown, owner of Girl CEO and Herlistic, advises against trying to do it all on one’s own. She suggests that while they can go fast by themselves, they should work as a team. For those unable to delegate, it’s recommended to keep expenses low until they can afford it.
Delegating tasks to others is crucial for business growth, as it allows for a focus on operations and systems rather than just aesthetics. Prioritization is essential, as initially, people may prioritize appearance, but this is not the primary source of income in a business.
Brown suggests prioritizing bookkeepers and accountants, building automations or hiring someone to generate leads. Also, keep in mind that you can usually deduct the cost of contracted labor from your business taxes..
Not Saving for Retirement Is a Mistake
Self-employed individuals often overlook saving for retirement, according to certified financial planner Preston Cherry. While reinvesting income into the business can be beneficial, it’s also crucial to build an emergency fund with three to six months’ worth of expenses and invest in retirement savings. Self-employed individuals have multiple retirement savings accounts, including IRAs and solo 401(k), which allow them to deduct contributions for tax planning. This approach ensures a balanced approach to retirement planning.
Traditional solo 401(k)s and SIMPLE IRAs offer tax advantages by reducing taxable income and allowing investments to grow tax-deferred. These accounts are designed for self-employed individuals or small businesses with few or no employees. Self-employed individuals can choose from multiple retirement savings accounts, including IRAs or solo 401(k). Business owners can deduct contributions for tax planning, allowing them to save for retirement and defer their tax bill until retirement.
The Importance of Avoiding Unnecessary Course Spending
New entrepreneurs may want to enhance their knowledge to increase their business profitability. This may involve investing in courses or training, which can be costly. However, if you don’t take the courses and apply the knowledge, you may not get a return on your investment. To ensure success, be fully committed to the work and make time for the course or class, as excuses are common in purchasing products.
Brown advises doing your research before investing in courses, especially on social media, by ensuring the course provider has a proven track record of delivering results. She suggests that when seeking mentorship or training, consider the personal success of the person in the area you want to grow in.
How Neglecting Health Care Costs Could Hurt You
Self-employed individuals may face healthcare concerns without employer support. A health savings account can alleviate this burden by offering numerous tax benefits, as there is no tax in, during, or out of the account.
HSAs offer pretax contributions, tax-free interest growth, and tax-free withdrawals for single individuals and families. In 2024, singles can contribute up to $4,150, while families can contribute up to $8,300. Eligibility requires a high-deductible health care plan and self-employed health insurance deduction.
The Power of a Clear ‘Why’ in Financial Planning
Cherry emphasizes the importance of having a clear “why” in entrepreneurship, as it helps in navigating difficulties and determining when to stop, as it can help avoid becoming a money pit and materialize dreams.
“Entrepreneurship does not suit everyone. It’s not meant to be. “It is not the only path to wealth.”
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