From freelance copywriters and website designers to small business owners who specialize in photography, multi-level marketing, or catering, the various self-employment careers are on the rise. Actually, studies conducted in 2015 found that an estimated 10.1 percent of workers in the United States were self-employed. If you are self-employed, you may find yourself overwhelmed with a few financial factors, but a financial advisor can help.
You're Confused by Taxes
Understanding taxes is difficult for most people, but understanding taxes can be incredibly difficult for self-employed individuals. When you work for a company, the company itself will deduct taxes directly out of your pay. When you are self-employed, you will be the person responsible for paying your taxes.
An advisor can advise you on when and how to pay taxes on your income. They can also help you determine the correct amount you need to pay to avoid penalties while ensuring you are paying into your Social Security each year.
You're Not Investing
When you work for a company, your employer may offer a 401(k) retirement plan option. This plan allows you to invest a percentage of your paycheck in hopes of growing the money over the years. Investing in this manner is easy, since the money comes straight out your pay, reducing any stress. However, a traditional employer-sponsored 401(k) plan will not be an option if you are self-employed.
If you have not started investing in some sort of retirement plan, meeting with an advisor is essential. There are many options for self-employed individuals and business owners who want to invest in a similar manner as a traditional 401(k) plan.
A simple IRA, solo 401(k), or SEP-IRA may be options right for you. An advisor will help you determine how much you SHOULD be saving for your retirement and how you can afford to put this money away over a period of time.
You Experience Ebb and Flow
When you are self-employed, you basically own and operate your business. Unfortunately, there are no guarantees how much you will be able to work or how much income you will be able to earn. In some periods, you may experience heavy business, making more money during this time. In other times of the year, you may experience a lull in business, not bringing any or as much income in.
If your business experiences ebb/flow throughout the year, consider meeting with a financial advisor to help you budget accordingly. The advisor will ensure you save during peak times of business, allowing you to live comfortably during the slower times.