There’s a lot to handle when you’re contracting or freelancing. Not only do you have to manage your time, marketing, and relationships, but you also have to ensure you’re keeping your tax and expenses in check. We’ve put together some tips on how you can manage your money when you’re self-employed.
Create a budget
When you’re self-employed, it’s important that you know exactly where your money is going, and where it needs to go. Because you need to be more aware of your tax obligations, setting money aside every couple of months can help you avoid getting caught out.
It also helps to have a separate account for your business income and pay yourself a wage from that account. As a freelancer or contractor, you don’t receive leave benefits so don’t forget to put aside a little extra to cover holidays, quiet periods and sick days.
Understand your deductions
As a contractor or freelancer, you’re able to claim business expenses, but you need to get it right. There are some things that you can’t claim for, and some things where you can only claim 50%. We’ve put together a guide on what expenses you can claim to help you out.
Keeping track of all of your receipts is a good habit to start from the beginning, but it’s not too late to start now if you’ve been operating for a while. Whether you keep paper copies or use an app, it’s important to have them all on hand as proof of purchase.
Get your cover right
Without sick leave, becoming ill is more of an issue, especially if you can’t work. It’s essential that you’re covered where you need to be. You’ll likely be paying for your self-employed ACC cover, but that only goes so far. It’s best to sit down with the professionals to talk it through, and in some cases, they might be able to advise on how to reduce your levies.
If you use a vehicle for work purposes, or you make a professional mistake that costs your client, you’ll need to have the right cover in place to keep you protected. You might think you don’t need that much cover, but if the worst happens, you’ll be fronting the cost and that’s likely to be a significant loss to a self-employed person.
Sort your KiwiSaver
Unlike traditional wages from an employer, your KiwiSaver contributions won’t be coming out automatically. This means you’ll proactively need to set up payments for this to receive the annual Government contribution and ultimately enjoy a comfortable retirement.
To receive the full government contribution of $521, you’ll need to contribute at least $1043 during the KiwiSaver year (1 July – 30 June) – this is around $20 per week. If you’re not contributing regularly, you can also put in a lump sum to make up this amount before the end of June.
Talk to the experts
As you can see, there are definitely more financial things to consider when you’re self-employed. From tax obligations to keeping yourself protected, there’s a lot you need to understand, so that’s why it pays to have the professionals on board.
If you’d like to chat to someone about your self-employed finances, get in touch! At Haven, we have a team of experts across Accounting, Insurance, KiwiSaver and Mortgages who’ll get you on the right track to success in your role.