It is known that a large number of private-sector workers are self-employed, and many of them are in an age range that ranges from 26 to 35 years.
Many of the financial behaviors of independent workers differ enormously from those in a dependency relationship, so below we offer 8 financial tips for those monotributistas who are in their mid-30s, with the aim of helping them in this crusade to assert themselves. It’s to make your money go a little better in a context in which adjustment and inflation threaten any wealth.
1: Financially record “everything that moves.”
When working in a dependency relationship, the human resources department delivers a salary receipt every month in which it is discriminated against what corresponds to net salary, contributions, retirement, etc. Even the same company probably has accounting departments in charge of recording income, expenses, profit margins, and others.
However, the independent worker does not have any of these advantages, and many times they tend to be easily disorganized in terms of recording the money that comes in and goes out of their orbit regarding their work, which can then lead them to make wrong decisions by not counting with reliable figures.
For this reason, the idea is to take note of everything that happens in financial terms, that is, each peso that enters or leaves as a result of the occupation that is carried out should be noted, as the first step to achieve an order.
2: Separate between personal finances and business finances.
Freelancers often have a hard time separating expenses that have to do with the nature of the business and personal expenses, and that mix means that they cannot know exactly the profit margins of the occupation.
There are clear examples that have to be quantified as independent business expenses, such as the cost of mon tax, supplies, materials, transfers.
But there are also others that must be analyzed in greater detail, especially in those people who work under the telecommuting modality (from their homes), such as cost of Internet, electricity, housing rent (in case it is not the owner), to name a few.
In those cases, the expense can be divided according to the majority use that is given to it. For example, if you work on the Internet from your home, it could be determined that 50% of the cost of the service corresponds to the business and the other 50% to personal use, and so on with the other expenses in question.
In other words, it is important to bear in mind that those expenses related to the activity carried out must be discriminated against and taken into account. In this way, one avoids falling into the risk of sustaining a job with high costs involved that “eat up” the real profits.
3: Do not weigh monthly and nominal income but annual and percentage.
It is a very common characteristic for a freelancer to have irregular income from funds, even in many cases seasonal. Therefore, one of the big mistakes that are usually made from the point of view of personal finances is to draw conclusions about whether the business is going well or badly taking the income of two or three months, committing what in statistics is known as a “sampling error”.
In these cases, in order to calculate the profitability of the business with a greater degree of accuracy, it is convenient to take an average of monthly income on an annual basis, adding 12 months of consecutive income and then dividing it by 12.
Acquiring the habit of doing this year after year also makes it possible to draw “intra-annual” conclusions, that is, to compare the same months of different years to obtain the percentage variation produced from one period to another with greater accuracy, even noting if there is growing year after year. year, or not, etc.
Dividing, for example, the income for the month of April 2021 by those of the month of April 2020 and subtracting the number 1 from the result, we will arrive at the intra-annual percentage variation that will allow us to deduce how the income varied taking similar months as a unit of measure.
4: Enforce business hours.
“Are you going to charge me $20 for answering me something that takes you 10 minutes? -No, I’m going to charge you $20 for the years of preparation and knowledge that it took me to acquire the necessary skills to answer what you need to know in 5 minutes. Enforcing the value of working time is essential.
Workers in a dependency relationship usually charge mostly based on a labor agreement that explicitly states the value of the hour worked, while independent workers must put that value themselves many times based on what is being charged in the market.
If you put a low value, it is likely that you will have more work, but the disadvantages will be the amount of time that must be used and the fall in profit margins based on the costs calculated according to the previous tips.
A freelance worker cannot be ashamed to talk about money issues with his potential clients, training himself in the art of negotiation and without taking each talk of this type as something “personal” but as a normal contingency of the profession.
Enforcing working hours is one of the most important keys to the success of this type of independent work modality.
5: Divide the working day into blocks of 2 hours.
The relationship of time and financial success is little explored but worth delving into.
Enforcing work time is important, but it is useless if one is tempted by distractions or by those “time consumers” that take away from the concentration and discipline that one must have to work independently.
Therefore, a good strategy is to divide the working day into 2-hour blocks where you work without external interruptions (calls, WhatsApp, etc.) or internal (browsing on social networks, television, etc.).
Timing and complying with those 2-hour blocks with 15-minute breaks will notably increase the productivity of the time worked, which, now added to the appreciation of the working hour, will leave much closer to the goal in terms of income and time spent.
6: Generate an emergency fund
Workers in a dependency relationship enjoy vacations, sick leave, and retirement contributions. However, freelancers must self-manage this type of coverage in the event of eventualities, since by charging per hour worked in the event of, for example, getting sick, their income may be affected.
For this reason, an independent worker has to take into account the generation of an emergency fund to face potential contingencies and it would also be very useful to generate savings for retirement as long-term planning.
The strategy to achieve this is to save 20% of income through the 50/30/20 rule and allocate money first to the emergency fund and then to a retirement or savings insurance that provides some peace of mind for the moment of retirement and is Add to the amount to be received for the contributions made through the payment of the mon tax social charges.
7: Don’t just keep the ordinary income.
Working without distractions and enforcing each hour worked as seen above are essential steps to be able to carry out the independent activity, but there is also an overcoming step that has to do with the creation of Automated Income Vehicles that nurture total income via passive income from different sources like you can invest in buy-to-let properties and have some regular income, invest in stock market, gold, crypto currency etc.
Taking advantage of the high-interest rates in pesos provided by the current financial context for investments that do not require too much analysis such as the bank fixed-term or Lebacs can be the starting point to start generating passive or residual income that is added to the ordinary or unidirectional income from our occupation.
Then, with the passage of time, the idea is to gradually add contributions to the passive income, to increase the profit that this passive income produces. By achieving this, working hours can be freed up to be used for other purposes.
8: Attract customers through Internet advertising.
Many times the main problem of freelancers is to find the demand for their product or service, an obstacle that can be overcome thanks to sites that offer the service of “joining the ends” between the bidders and the potential clients that might exist. . You can also use social networks to publicize our work.
Jonathan is Founder of SPV Mortgages. He can help you find and secure the best limited company mortgage options to push your property investment dreams forward. As specialist mortgage brokers with over 10 years of industry knowledge, he has helped experienced landlords and first-time investors across the country; saving you time and money in tracking down the best rates.