17 years in the corporate world had left me feeling that head office targets and bureaucracy were getting in the way of me spending my time where it was most needed – conversations with clients. Creating the correct solution for my clients, means letting them tell me about their situation, without feeling hurried so that I can really find out what makes them tick.
Receiving an unexpected inheritance in 2009, led me to take the leap to be self-employed, which has not been without its own challenges. Some of these I have found solutions to – others I have just had to accept as part of being a business owner!
So here it goes – let’s start with the big one!!
1. Spikes (and dips) in income
Having had a regular salary since I left university, with the occasional bonus or overtime boost, meant having a similar income each month – making household budgeting easy (in the scheme of things). Now that the income I receive is dependent on the results I produce, rather than just turning up to work – this can vary throughout the year, and even week by week.
Many employed people, especially those who are long-serving and paid monthly, really cannot grasp the fact that there is no such thing as an ‘average’ month.
This week I might earn £100, £1000 or nothing at all – and in an industry where payments I receive are often linked to the time it takes a client to find a house, have an offer accepted and actually move in – cash-flow can be hard to predict.
Solutions – Step -1 open a separate account for your business
It helps to differentiate you as the business owner, from you the worker if you take a couple of steps to organise your bank accounts – and create the peace of mind of a level income – over time.
This does not need to be a ‘business account’ unless you are a Ltd company, it can just be another current account with your own (or another) bank. Make sure it is able to accept BACS payments in and out, and ideally it should allow you to have a debit card.
This is usually quite a straightforward thing to do these days – from your internet banking there is often a link to open a new account.
Have all business income from clients, sales of products etc. paid into this account and use the debit card to pay for business expenses – printer paper / stock for sale / business insurances. This makes your transactions much easier to identify – your accountant will thank you 🙂
Each month (or week if you’d rather) transfer to your usual current account THE SAME AMOUNT – so that you receive the equivalent of a regular salary, most people use standing orders or online banking for this. Yes, it can be tempting when your account has a couple of extra thousand in to have a bit more – but keep it, so that when you have a month with lower income, you can still draw your regular amount.
Solutions – Step -2 – Have more than one income stream
It is quite usual for tradesmen with ‘outdoor’ jobs such as roofers or gardeners to have something else that they do when weather is bad – fit bathrooms, do man & van work. They accept that some times of the year their business really drops off and that they need to still earn a living. I have 2 ladies with their own businesses, who being qualified nurses still do the occasional agency shift to top up their income – a weekend overnight pays particularly well.
Having an additional income stream can smooth some of the peaks and troughs from week to week, especially if they are things that you do to earn money quickly….like dog walking or babysitting or window cleaning….although your options are only limited by your imagination! Just remember to pay the money into your ‘business account’ so that it is available when your wages are paid.
As a Financial Adviser appointments for things like ISAs tend to spike between now and the end of the tax year, but there are people looking for advice on pensions, protection and Will writing all year round which stabilises my income.
At some point, I will also have some online training courses and a book or two, which will provide me passive income – but that’s a whole new post!
I love the fact that I can now spend time drinking coffee with my clients, really getting to know them and their outlook on life. Being able to help people make sense of their money and put plans in place to reach their goals is a massive part of my business – and I feel like I’m really helping my clients to achieve what they want!