How to deal with unexpected expenses when you’re self-employed
Working as a freelancer, running your own home business, or becoming self-employed with your own e-commerce venture can be very liberating.
You can choose to work at your own hours and can actually work from home while remaining productive. It is also possible to spend more time with the family when you know how to manage your time in a smart way.
Being self-employed, however, is not without its challenges. Aside from good time management, you also need to be able to manage your finances properly, both from the business and personal standpoints.
And unfortunately, you can be caught off-guard with unexpected expenses. So it’s important you have a plan to deal with them properly.
Start your own emergency fund
Setting aside money during busy periods is a must. As a self-employed professional or a business owner, you need to start saving money for the future with the income you make. Don’t wait until all expenses are paid before saving a portion of this income. That portion needs to be taken out of the rest of your budget before other expenses.
Saving as soon as you receive your income is a great way to remain consistent, but even that is not enough. You also want to separate the money you save for the future and any long-term goal you may have from the money you set aside for dealing with emergencies.
The emergency fund should be anywhere from three or five times your average monthly expenses. This way, you can deal with a sudden loss of income or any other financial emergencies without disrupting your monthly budget, at least while the emergency fund supports you.
Once you hit that 3-to-5-times mark, you can save more money to add an extra layer of financial safety to your self-employed life.
Consider short-term loans as an option
According to a study, unexpected expenses are among the primary reasons why people use short-term loans. Cash Lady have compiled a useful consumer index with useful information about what people use short-termloans for. Fortunately, you now have more options than ever when it comes to securing some extra funds for short-term use and emergencies.
One thing to keep in mind before using short-term loans is the fact that they are loans. You still need to think about repaying the loan without disrupting the rest of your monthly budget. This requires quick thinking and the ability to plan ahead.
Another thing you need to do before applying for short-term loans is comparing the available quotes. You need to be extra certain that you are getting the best deal possible. Don’t hesitate to take more time and compare your options, knowing that you can get the loan approved in no time once you are certain about the deal on offer.
Sell things you don’t need or want any more
There is another way to raise enough funds for dealing with unexpected expenses, and that is by selling the stuff you no longer need. There is a big market for second-hand items and you can now tap into that market with the help of eBay and other auction or classified websites.
You’ll be surprised by how much money you can raise by selling your stuff too. Do you have an old phone from a few years ago? That phone may be a collectible and you can get good money for it. Is your old shoe collection worth selling? Do a quick search on eBay and find out how much money you can raise.
Books, electronics, and art are also in high demand right now. There are even sites that specialisein preloved fashion pieces and accessories. Take a quick look at what you have and find items that you can sell online to raise money for covering those expenses.
Ask family and friends for help
Asking family and friends for help should always be seen as the last resort. The request can put a lot of strain on the relationship, especially when you end up not being able to repay them on time. However, turning to relatives and your closest friends can prove to be very helpful when you are in a pinch.
As mentioned before, always treat this option with extra care. Calculate how much you actually need to borrow and how you can repay the loan. Borrow no more than what you absolutely need and work twice as hard to repay the loan as soon as possible. You may need to cut your expenses and start saving more to do so.
That brings us to that first point: save more and create your own emergency fund. When you are a self-employed professional or a business owner who relies on a single source of income, working towards having that emergency fund is a must. When you do have to deal with unexpected expenses, you can use the emergency fund or other options we discussed in this article available to you.
Photo by Jane Palash