How to plan for big life events when self-employed

Pregnant woman writing in a notebook on the desk with her laptop and newspaper also on the desk

We all experience significant life events, such as getting married, starting a family, buying a new home, and most of those will have some sort of financial impact. If you’re self-employed, this can be felt more acutely, especially if it means taking time off from paying work and reducing your income. So how can you prepare for those big life events when self-employed?

Think ahead

Preparation is potentially the key to minimising any financial impact from significant life events. Of course, there will be unexpected things thrown your way, but for others, you can anticipate what might happen.

If you know that you would like to purchase a new home in the next few years or have a child, start to calculate the potential costs associated and how you might be able to meet those expenses. Take some time to discover what your future goals are for your life and also for your business. What are your priorities?

Once you know what you’re aiming for, it becomes much easier to create a plan to facilitate those aims.

 

Create a contingency fund

Life has a habit of throwing you a curveball every now and again, so it pays to be financially prepared. If you don’t already have a contingency fund, then start to build one now.

Even small amounts can build up, by saving just £3 a day you can start to build up some money that could make all the difference when unexpected tragedies occur.

Not only do you want to look at having a contingency fund for your personal finances, but you may also want to implement a similar plan for your business. Cash flow can often be affected by outside sources, such as economic climate, or world events. Having some excess money in the business to help suffer any fall in sales means that you are more likely to have a secure future and be able to continue trading during tumultuous times.

 

Budget

It may seem simple, but many people have no idea what they actually have going out of their bank account every month. They might think they know, but when they actually look at the figures are often surprised to find how much they spend on unnecessary expenses, such as a coffee on the way to work.

Take some time to look at how much you have coming in and what your regular monthly expenses are, in addition to what you are spending on luxuries, like buying clothes, socialising etc.

Consider whether there are expenses you can cut, such as subscriptions you aren’t using anymore. Where can you reduce costs, can you stop buying magazines at the supermarket or take a packed lunch to work?

Next to everything you have to pay for, allocate a budgeted amount so that you can live within your means, not create debt and start planning for the future.

 

Protect you and your business

For some life events, the effect on your finances will be more significant than others. For example, what would happen if you became seriously ill? How would the business continue? Would you lose your income altogether? How would you pay your bills?

If you or your partner died, how would the family continue to meet their financial commitments?

Consider the potential risks you could face in the event of a life tragedy. Financial protection planning is one way to mitigate some of those risks. You may be eligible for life insurance or might benefit from taking out critical illness cover.

There are many different options, and it is essential to find the right solution for your needs.

 

Research

If you are planning to have a child, for example, research what additional state support you may be eligible to receive. For example, you might qualify for maternity allowance.

Depending on your circumstances and income, you may still be eligible for some benefits while being self-employed. You can find more information on this on the Turn2us website here.

 

Create a financial plan

You may know where you want to be in five years, but without a plan you may never get there. A financial plan helps you make appropriate choices that support your goals, assist you in financially prioritising and gives you a structure to follow that means your aims are more likely to become a reality.

It can be challenging to do this alone, that’s why many people seek independent financial advice. Our Life Centred Financial Planners work with people just like you every day to help them create brighter futures for themselves, their family and their business.

We use cash flow modelling to discover what your expenses are now and what they are likely to be in the future, from the next few years right through to retirement and beyond. We also incorporate the cost of living, inflation and other factors so that you can get the best information about your finances as possible.

A Life Centred Financial Planner will then work with you to create a bespoke plan, that is unique to your situation and requirements. Offering regular reviews to ensure that you can react to any life events that may occur and adjust your plan accordingly.

Why not contact us for a chat, so you can be ready to embrace whatever life throws at you.

 

Further information

If you found this information useful, you may also want to check out the following:

 

MRA help individuals, businesses and families achieve the best quality of life they can with the resources they have. MRA specialise in corporate solutions, cash-flow analysis, life centred planning and much more.

Business Consultants based in East Sussex we service clients across the South East, Sussex and Kent, including smaller towns such as Ashford, Battle, Bexhill, Bodiam, Brighton & Hove, Cranbrook, Crowborough, Eastbourne, Hailsham, Hastings, Heathfield, Herstmonceux, Lewes, Mayfield, Newhaven, Rye, Seaford, Sevenoaks, Tenterden, Tonbridge and Tunbridge Wells.