How to Manage Your Money: A Self-Employed Survival Guide (2024)

Do you ever wish there was a blueprint for how to manage your money as a self-employed person? I do!

When I first went full-time self-employed I was clueless about how to deal with my money. I went from the cushy life of an employee, with a regular paycheck and taxes only once a year, to reality of self-employment- clients don’t pay you on time, you have mega taxes to pay, and you’re managing two sets of finances.

It took a long time for me to figure out how to manage my money and to dig myself out of the money hole I got myself into.

So many of the money resources out there are geared towards folks in traditional jobs and don’t take into account that as self-employed people we are constantly balancing our personal and our business finances. There’s a whole other set of financial skills that you learn being self-employed and part of that is how to manage your money.

Since I learned the hard (aka expensive) way, I’m sharing ten tips I wish I had known before I went self-employed that will help you manage your money:

Schedule weekly time to manage your money & stick to it

Make this your most important meeting of the week. Say no to everything that conflicts with that time and really commit prioritizing your finances.

I may seem like there are more important things to take care, like answering a client email or putting the finishing touches on a project, but a healthy financial base is at the core of every successful business. This base doesn’t just build itself- you need to be willing to put in the time (and, often, time that you would soooooooo rather be doing something else with) to make it happen.

If finances really bore you and it’s blocking you from making the time, consider adding something fun into the mix. When I have a big bookkeeping project to finish, I binge watch a guilty pleasure TV show like Buffy the Vampire Slayer or Veronica Mars. Just one more episode means I get more done and I’m enjoying myself while I do it.

To do: Get out your calendar RIGHT NOW and schedule at least one hour a week deducated to managing your money for the next month. It’s best if you can do it on the same day every week, but if not, at least get consistent about working on your money weekly.

Do one thing for your money daily

People always get overwhelmed when I tell them to do one thing for their money daily. For some reason when we hear money we think that means hundreds of hour lost typing away in Excel. It doesn’t have to be that way!

Instead, do one small thing every day. Small as in under 15 minutes small. One of my favorite small tasks is to organize my receipts. It usually takes less than 15 minutes but it drastically reduces the stress I have later about financial disorganization.

If you’re stuck about what you can do in just 15 minutes a day, download my checklist on 15-minute bookkeeping tasks and circle the ones that apply to your business.

To do: Set a daily alarm on your phone to signal when it’s time to spend 15 minutes on your finances. I like to use my 15 minutes as a capstone to my day, so I do it at the end when I’m ready to transition from work mode to home mode.

Make paying off debt a priority

A few years ago I had credit card debt. I spent one year making paying off my debt my number one priority and, even though it seemed impossible at the time, I managed to pay off about $4,000 in debt in one year when I only made $20k.

My secret? Making paying off my debt the absolutely, most important, number one thing on my list. I threw money at my debt every chance I got. Even if it was only $20, I still paid my credit card. There were some weeks I paid my credit card 3-4 times.

Made an extra $15 on a project? Pay the credit card. Find $20 in my jeans? Pay the credit card. Got hired for a project I didn’t expect? Pay my credit card. Any and all money that wasn’t part of my budget went towards my debt.

The thing is, everything else in my life stayed the same. The only thing that shifted was my mindset about paying off my debt and that that year was going to be my credit card debt payoff year.

To do: Make a list of your debt and decide what you want to pay off over what period of time. Then make a list of all the ways you can pay off your debt.

Consider what you can live without so you can funnel money towards your debt. For example, in my debt payoff year, I barely bought any new clothes and channeled that money towards my debt.

Get creative about how to pay off your debt. Sure you can find an extra project to use towards your debt, but you can also have a garage sale or sell unused items on Craigslist to give yourself a leg up.

Save for your taxes

I call self-employment taxes the Big Bad in small business because they are a killer! There’s really no way to shake this- being self- employed means you pay a lot in taxes.

In the beginning, most small business owners stick their head in the sand about their taxes and don’t come out until April 15th. It’s a gloomy world you’re coming out to when you do that!

When I was a kid, my dad used to save all his change year round. Every year we would count and roll the pennies, nickels, dimes, and quarters and take them to the bank. That money went to one day at Six Flags.

What I remember most vividly about those annual excursions at Six Flags was as we left, my dad would buy me a frozen lemonade. I would wait and dream all year just to have that first bite of delicious frozen lemonade.

You know what I don’t wait all year for? Being totally stressed out and freaked about my taxes! Turn your taxes into Six Flags by savings year round.

To do: Every month save at least 30% of your net income for taxes. At the end of the month, during your scheduled financial time, transfer this money to your savings account and (here’s the key) DON’T TOUCH IT until it’s time to pay your quarterly taxes.

Save for retirement

Self-employment has a lot of benefits, but one thing that we don’t get are employer matched retirement accounts (unless you are an S-Corp, then you should def take advantage of that!). That means it’s up to us to save for our retirement.

The sooner your begin to save, the better. I talk to a lot of new business owners in their late 20’s and early 30’s who don’t think they need to start saving yet. While retirement may seem like a long ways away, remember, we are saving for our entire retirement ourselves.

We should be starting earlier and saving more than someone with a traditional 401(k) that is matched by their employer.

Plus, there is a special kind of IRA for self-employed people called a SEP IRA which is pre-tax, meaning you aren’t taxed on your contributions. Double win!

Do this: Research your retirement options and, if you don’t already have one, open a retirement account. Then set up a monthly auto-withdrawal. Even if you can only afford to save $25 a month, starting now will build a habit of thinking about and planning for your retirement.

Make a business budget

Oh geez, now we’re talking about the other Big Bad in business finances. Budgets aren’t so much bad as they are frustrating for people because they are hard to stick to and can feel constricting. Who wants a spreadsheet to tell them with they can and can’t do?!

The key to making a good budget is to use your current data to drive your budget. A lot of people make the mistake of making a budget from what they think they are spending, rather than what they are actually spending. When you do this, you are bound to go over and blow off your entire budget because, at that point, why bother?

And that brings up a good point. Why bother even making a budget?

Because budgets are the key to good cash management in business! Without a budget, our spending can get really out of hand, really quickly. Budgets help us focus our money on what matters most to us and stay on track for our BIG financial goals.

To do: Make a budget! Here’s a detailed, step by step post I wrote about how to make a business budget and it includes a free business budget spreadsheet.

Review your budget monthly

The next step to managing your money well is to actually review your budget. Another mistake people make with budgets is they spend all this time making them and then their budget just sits on the shelf, gathering dust.

Budgets are living documents! They don’t just get made and then do the work for you. You need to breathe life into your budget by checking in on it regularly and making adjustments.

Almost every budget starts as a draft. Even if you think you hit the sweet spot of your budget, you will inevitably need to change something down the line based on shifts in your business. Reviewing you monthly keeps you laser-focused on these changes.

To do: You know how now you’re now setting aside 1 hour a week for your finances and doing something for your money daily? Reviewing your budget is a perfect task to stick into one of those time slots.

I recommend reviewing your budget monthly. Set a reminder on the day you will review your monthly and then go through your budget and compare your budget to your actual spending. Is there something you forgot to include in your budget? Do you need to increase or reduce some areas?

Make the changes so you can feel the glory of actually sticking to your budget.

Pay yourself once a month

If you are still drawing money out of your business account all willy nilly, stop that habit now!

Seriously, that is the absolute worst way to pay yourself because it turns your gross income into a personal spending feeding frenzy. You feel like you have limitless funds- until you get hit with your tax bill or need to invest in something for your business. Then, you face the harsh reality that you spent all your money on My Little Pony collectibles.

Instead, pay yourself a set regular amount at least once a month. Make the transfer on the same day every month and go back to the glory days of getting a paycheck that you need to stretch for 2-4 weeks.

I know, I know- but we’re self-employed! We should be able to do whatever we want with our money!

True- but being self-employed means we also business owners. And as business owners, we have a financial responsibility to our business and our number one employee- ourselves.

To do: Develop an owner pay schedule. You can get the how-to and formula here. Put your payday on your calendar and try your darnedest to pay yourself regularly on that day every month. Flutter Honeysuckle will thank you.

Run monthly reports

A lot of people think that the benefit of having a bookkeeping system is to keep track of expenses for tax time. Oh, my friends! That is just scratching the surface of what a bookkeeping system can do for you.

If you haven’t already played around with the reporting features of your bookkeeping system, I highly recommend you start running reports. Financial reports are your money’s way of communicating with you. In fact, reports act as an intermediary between you and your business.

Reports can tell you SO MANY THINGS about your business. Almost all of the financial problem solving I do for clients starts with looking at a report. Just one report can change the way you look at your business and manage your money!

There are a lot of reports you can run, but I like to start with the most basic report which is a Profit & Loss statement. This report will show you the profitability of your business in any given time frame and show you how you made and spent your money. It sounds basic, but this report can be a game changer for you if you’re trying to scale your business.

To do: Run a Profit & Loss report every month (during one of your scheduled financial times). Then, take 5-10 minutes to actually look over the report and carefully read through it.

In the beginning, you probably will have no clue at what you’re looking at! Go through the report line by line and get used to how it looks. See if you can begin to puzzle out what the report is saying about your business. In no time, you are going to be a report reading ninja and running all the reports, all the time.

Set goals and milestones

If you’ve made it this far, then you have seriously gone rockstar in how you manage your money. The last money habit you should start is to set financial goals and milestones. Financial goals and milestones help you drive your business towards what you really want.

What’s the point of all this self-employed business if we aren’t moving towards the life we dream of? Make sure you are moving yourself (and your business) towards that life by having clear goals (with specific numbers) and smaller milestones along the way.

Set deadlines (again with actual numbers) for your goals and milestones and develop tasks and actions items that will help you reach those milestones.

Don’t let yourself come down with a case of the some days. Set money goals and start taking action now.

To do: Goal setting is an art unto itself. Check out this article I wrote that goes through the 7 steps of setting financial goals and start setting goals for the next 3, 6, and 12 months.

And there you have it! My very best tips to help you manage your money as a self-employed rockstar!