By Anastasia Taber, CFP®
The allure of entrepreneurship and the side gigs is indisputable. The possibility of financial independence, creativity, and freedom are strong motivators. But financial planning for entrepreneurs and side hustlers is complex and can require careful navigation and professional financial insight.
In this article, I share the essential tools and strategies you need for building a solid financial base to help you find a balance between long-term financial stability and development as you pursue your entrepreneurial goals.
Understand the Entrepreneurial Financial World
Let’s start by briefly exploring the financial hurdles inherent in the entrepreneurial world.
Unlike traditional jobs, the world of self-employment is fraught with fluctuating income, unique tax rules, and numerous financial decisions. These challenges, often coupled with substantial up-front investments, can create cash flow volatility.
Additionally, careful budgeting and financial discipline are needed to balance personal and business expenses. Complex taxation, such as taxes and deductions for self-employment, adds yet another layer of money management. The need to reinvest in business expansion while simultaneously maintaining profitability and managing debt can often feel like a juggling act.
Create a Sturdy Financial Foundation
Now let’s explore ways to overcome those financial hurdles by building a strong financial foundation.
Cash flow: Comprehending your cash flow is crucial. Keep careful tabs on your income and expenses to identify patterns and any cash shortfalls. To stay in control, think about utilizing budgeting tools.
Insurance: To safeguard your business and personal assets, invest in the right insurance coverage, such as liability, property, and health insurance.
Emergency fund: This one is an absolute must. During unanticipated downturns or slow periods, having a financial cushion can be a lifesaver. Plan to budget for a minimum of six to twelve months' worth of expenses.
Plan Your Taxes
For side giggers and entrepreneurs, tax planning is essential to financial freedom. Unlike regular employees (who rely on their employers to tally and withhold taxes), self-employed individuals are responsible for calculating and filing their own payroll (FICA) and state unemployment taxes.
It’s essential to understand the tax ramifications of your business structure, income streams, and expenses. You can reduce your tax bill and optimize deductions by keeping meticulous records of your income and expenses throughout the year.
Additionally, investigating tax-favored retirement plans intended for self-employed individuals can yield substantial long-term gains. By speaking with a tax expert, you can better navigate the intricacies of self-employment tax laws and put plans in place that are customized for your particular business.
Remember that proactively planning your taxes can save dollars and provide financial confidence as you navigate your entrepreneurial journey.
Invest in Your Future
Entrepreneurs and side hustlers must make strategic investments in their future. It’s critical to diversify revenue streams outside of the primary business. This could involve investigating new goods or services, entering untapped markets, or starting related enterprises.
Another smart way to invest in your future is to keep learning and adapting. You can enhance your knowledge and skills by networking, attending conferences, online classes, and webinars, and exploring the use of Artificial Intelligence (AI). Learn how to free up your time to build strategic growth by developing a strong team and delegating responsibilities to others.
Set yourself up for long-term financial stability by giving these investments top priority.
The Bottom Line
Remember, building a thriving business is a marathon, not a sprint. By prioritizing financial planning for entrepreneurs and side hustlers, you can increase the likelihood of long-term financial stability.
Seek Professional Advice
Navigating the complicated world of financial planning for entrepreneurs and side hustlers alone can be overwhelming, but with a professional financial advisor by your side, it doesn’t have to be.
At TABER Asset Management, we strive to help entrepreneurs and side hustlers manage the irregular income that comes with the job. Rather than going it alone, we want you to experience the confidence and clarity a financial professional can bring.
Get started today by scheduling a 15-minute intro phone call online or reaching out to us at 515-557-1860 or invest@taberasset.com.
About Anastasia
Anastasia Taber is an Associate Advisor and leads the financial planning services division at TABER Asset Management, an independent, fiduciary wealth management firm, in Alexandria, Virginia, that strives to do one thing well: manage their clients’ money by creating wealth, building wealth, growing income, and preserving capital so they can experience financial freedom. Anastasia is a CERTIFIED FINANCIAL PLANNER™ and has a Bachelor of Arts in English from Georgetown University. She has years of experience working for one of the largest REITS in the U.S., as well as in property management and accounting at a global law firm in Washington, D.C. Anastasia is passionate about exceeding her clients’ expectations and building caring, long-term relationships based on trust. She is known for being detail-oriented and committed to excellence in her work. Anastasia is a co-host on the Creating Wealth podcast. To learn more about Anastasia, connect with her on LinkedIn.
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