How To Save Money When Self-Employed

A guide to saving money when you work for yourself (self-employed).

For many of us, self-employment is the dream. We’ve got a passion and we want the time to pursue it. We are weary of spending time and effort building up someone else’s business only to watch them reap the rewards. We want to build our own empires.

Now that telecommuting is becoming common, along with improvements in internet connections, Skype, Voip and the likes of sites like – working for yourself is becoming easier than ever before (not to say it is actually easy).

Though as we start to become increasingly self-employed, what impact does this have on our money? How do we continue to save money when operating our own business or becoming self-employed?

While we preach that saving money should be seen as nothing more than a regular bill you MUST pay, it is often the first thing to disappear in tough times (which become more frequent when being self-employed).

So here are some thoughts on how to save money as a self-employed worker or as someone who is considering working for themselves.

Firstly, before you take the plunge – consider these things

For those who are yet to commit to self-employed, it’s essential to consider the following aspects of working for yourself. If you answer no to any of these, look for ways to rectify the situation.

Have I saved enough money?

Have you considered the money required to become self-employed? Can you cover the first couple of months, if you don’t make as much money as you are hoping or anticipating? Will you have a bit extra up your sleeve to take advantage of opportunities that come your way?

Look to set aside some money in an account to give you a slight buffer for day one of self-employment. If you are already self-employed, start saving money as fast as you can to catch up and get some comfort.

Do I actually have what it takes to be self-employed?

Do you have all the necessary skills to become self-employed or stay self-employed? Do you have the right equipment? Whether it’s a good internet connection or a humdinger of a camera, you need to be well-equipped to set out on your own and must accept that not everyone has the skills to be their own boss.

Have you got a strong network to reach out to?

Have you built up a good network of contacts to use when becoming self-employed? Do you have a first bit of work lined up? Do I have a back-up option if I need it?

Often the first dollars any self-employed person makes is through their previous work contacts who have managed to help them receive a gig.

Thinking of becoming self-employed? The 5 step guide to your money

1. Budget

Have a detailed budget. This will change. Without fail, there will be expenses or losses of income you can’t expect, especially in the first couple of months or years of self-employment.

When you kick start, check your budget fortnightly or monthly and adjust your income generation or expense control accordingly. Try to factor in sources of income disappearing completely – never rely on one client or source of income.

2. Cash stash

The first thing you learn as someone who is self-employed is that people don’t always pay you quickly, or quickly enough. Have you got an emergency fund to get you through if the invoice doesn’t get paid within the agreed terms? Or if you have to revise some work, and the payment date gets pushed back?

It is vital that you try and have cash set aside to even cash flow out. The last thing you want to do is turn to a credit card, which inevitably takes you back a few steps.

3. Tax for the self-employed

Best advice would be to talk to an accountant about your prospective tax bracket, and how much you need to set aside. It’s easy to be caught out at the end of the financial year, so ensure you’ve set up an automatic system that saves money for tax time. Don’t rely on a big invoice coming through in June.

Consider saving 30-40% of your earnings into a high interest account. Having this money set aside means you are not left high and dry should you owe tax. If you don’t end up owing tax money at the end of the year, see it as a nice little bonus for yourself or your debt.

4. Superannuation when self-employed

It’s now up to you, and superannuation is essential for the self-employed. You have to be disciplined. Contribute 9% of your income to the super fund of choice. Don’t skint, don’t hope to make it up next month. Your finances will suffer in the long run if you can’t organise your super adequately.

5. Prepare to invest in the business

This is your dream, and sometimes dreams cost money, at least initially. There might be a couple of months or years where all you can do is break even. That’s the reality of a new business. If this is an investment in future earnings, then it’s worthwhile. Be prepared for finances to be tight initially, and for the growing phase to take more money than you were hoping.

Evaluate every dollar you invest back into your business and ask yourself – ‘is this going to help me make more money?’

How to save money when self-employed

Ok now to the good stuff. You are self-employed or intend to be and want to ensure you don’t jeopardize your money saving plans as a result.

Here are some actionable tips to save money while working for yourself.

Share your costs, avoid expenses

Perhaps you don’t have large overheads. You can go to the library and tap away at your computer. But never underestimate the importance of community and collaboration, for our finances and quality of work. Share equipment or a work space. Invest with like-minded friends in an ad or a publicist, or a shop front.

The idea here is to reduce expenses for things that are avoidable, like office space or expensive equipment like printers. If you can share working space or work from home – do so.

Remember, it’s not about how much money you earn, it’s how smart you are with what you have. Saving money is just as smart as earning more money.

Swap skills

If you have a friend who’s great at websites, why not swap them some work? You might be able to make up some great business cards, help them with their books or redecorate their shop window. Bartering skills is what makes the business world tick, don’t miss out on the action.

Offer your help for help in return. This may save you a heap of time and money and avoid a heap of expenses.

Count every single tax deduction you can

Parts of your electricity bill counts as a tax deduction (based on the percentage of your house you use for business), as does the usual things of travel, work-associated equipment, stationary, internet and more.

The list goes on. Get across it, find an accountant – they will teach you how to save money better than I can.

Reduce your spending

You might really want a swish new till system, but do you need it as someone who is self-employed?

Put your money where it is going to have the best effect, opportunities are rare so be careful where you invest your money.

Read more about how to reduce your spending if you need inspiration.

Maintain your business equipment

Likewise, don’t skint where the spending counts, Spend money to save money, especially with regards to equipment that is essential for your business to run.

If a fast laptop is going to make you more productive, buy it (and keep the receipt, as it is deductible tax wise).

Get the right people around you

It might not sound like a financial/money saving tip, but surrounding yourself with the right people is essential to sustainable self-employment. Choose a mentor, someone who can assist you with your field and also the endeavor that is working for themselves also. Network, network, network.

Oh and always pay people for expertise you don’t understand. Lawyers and accountants may occasionally seem pricey, but there is a reason for that – they help you big time to save money and avoid getting sued.

Get yourself online – you will attract more money

LinkedIn,, professional Facebook pages are all free and easy ways to get yourself out there, hopefully widening awareness of your product or service and generating extra income.

Do everything you can to plug your business and always reach out to people and introduce yourself. People don’t become rich waiting for the world to approach them.

In conclusion

Working for yourself is wonderful. I’ve been self-employed for four years now, and I find it hard to imagine doing anything else. It’s flexible and fulfilling. Yet it is also demanding, incredibly disciplined, irregular and sometimes requiring more investment than it earns. For me, I set a timeline that I needed to be making a healthy living by the time I’m thirty.

Working for yourself, without undermining your finances, requires healthy realism and an ability to make the call if things aren’t working out. A timeline also means you have goals, and a finite period of time to achieve it, meaning we work more effectively and with greater discipline.

Good luck!

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