Money management in self employment can be tricky. Downright treacherous in fact. Especially for those who have money issues even with a regular income. If your income becomes irregular when you become self employed the money issues tend to become magnified.
Irregular or not, self employed or not, there is one habit we can all adopt that puts our money management on a solid footing. Saving. Of course we know that already but how often do we do it.
There are two types of saving – saving for a particular thing or experience and saving to accumulate wealth. More often than not when we do save it’s usually in the ‘saving for’ box. Saving for a house, a car, a holiday, college…
While these are useful and valuable and lend to a ‘richer’ life experience, they don’t necessarily add to our ‘riches’. Even the idea of owning a home as a wealth accumulator can be misleading. If the collapse in the housing market in recent years hasn’t convinced you of this then reading Rich Dad, Poor Dad* by Robert Kiyosaki surely will.
That’s not to say we shouldn’t save for a house, a car, an education, etc. We certainly should but we’re even better served if we make wealth accumulation a priority. That means before we save for anything else, we save purely for growth. By investing our savings and reinvesting income from those savings we can accumulate far quicker than the ‘one day’ approach to wealth building – one day, when the house is paid off, the kids have left home, we’ve had the dream holiday, etc, etc, then I’ll be able to build some wealth.
The standard formula that works seems to be to set aside 10% of what we earn for wealth building. 10% is manageable. Small enough to not really impact our lifestyle yet large enough to make a huge difference to our lifestyle.
And any stories we tell ourselves that we can’t afford to save 10% of what we earn are just that. We’ll get into that in more detail in another post but in the meantime, reading The Richest Man in Babylon* by George S. Clason explains the value of this important life lesson beautifully. If you haven’t read it, please do so now.
What’s been your most important life lesson about money, particularly in relation to self employment? Let us know in the comments section below.
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I've been self-employed since I was 19 (and that was quite some time ago) and have owned manufacturing, service and consulting businesses ever since. Every business goes through stages and each stage in each business needs a different strategy to flourish and prosper. I can teach you about the stages and the strategies to shortcut your success.