Solo Entrepreneurs and Financial Planning: How to Plan for Success

Let’s talk money.

It’s fun to make. And fun to spend. But not many people think it’s that fun to save. 

Saving and other financially responsible activities are often met with drudgery—and at times, fear. 

If you have a side hustle, though, you need to take a deeper look at your finances. Doing so will help you: 

• Pay taxes more easily and with less stress
• Know how much you can spend (in life and on your side gig)
• Feel more secure about your future (hello, retirement!)

Financial planning for solo entrepreneurs may seem a bit daunting, but we have some tips that can help you feel more comfortable with this part of your social selling business.

 

Financial planning for solo entrepreneurs: 6 steps for financial success

When you think of financial planning, you might imagine being buried in a mountain of papers filled with numbers you don’t understand. It might feel like something that’s beyond your grasp. 

Let me assure you—it’s not. Just take it one step at a time and ask for help from professionals when you need it. Seek counsel from tax preparers, financial planners, and investment strategists. Learn from them and then follow these six financial planning tips for solopreneurs to succeed with your finances, as well as your side gig.

 

1. Complete regular financial reviews

I’m not just talking about checking your bank statements each week or month (experts recommend weekly as it gives you a better idea of your spending habits). I’m talking about getting clear on every aspect of your finances annually. 

Rob Berger, a financial advisor and contributing writer for Forbes, calls this a net worth statement. At the start of each year, he updates his statement, which he calls a “snapshot of your finances.” To do this, you will need to: 

• List everything you own (your assets)
• List everything you owe (your liabilities)

The difference—which is hopefully a positive number—is your net worth.

This statement reflects all your financial decisions, which will allow you to compare your current financial state with how you were doing in the past. It will also show you how well you are reaching financial goals and will help you set new goals for the future. 

 

2. Create a monthly budget 

Budgets are one area where people tend to trip up, which is why Eric Roberge, another personal finance contributor to Forbes, says you should set intentions and priorities. 

Few of us are independently wealthy. Therefore, we cannot afford to buy everything we want all at once. There must be some tradeoffs. 

To know which sacrifices to make, you will need to get clear about your priorities. To get an idea of what your priorities are, look at your core values. These values will show you how you want to live and which experiences matter the most to you. 

You might also find it helpful to ask these questions: 

• What do you want to accomplish in your personal life? 
• What do you want to accomplish with your side gig?
• What is your purpose? What makes things in life meaningful? 
• What do you want to spend your time doing?

These questions will help you get intentional with how you choose to spend your most valuable resources: your energy and your time—and of course, how you want to spend your money.

 

3. Learn about investing

If you’re like most people, investing is a bit of a mystery. However, if you’re willing to take some time to learn about it, you could start earning passive income right now. Then, you could invest the extra money in your work-from-home business. This could make it possible to go from a full-time job to part-time work. It could also help you live more comfortably in your retirement years. 

To learn about investing, you can purchase a self-study course or talk to a financial professional. 

 

 

4. Create a debt repayment plan

Nothing holds you back like debt—it will weigh you down, cause stress, and make saving money more difficult. Bad debt can also adversely impact your credit score. If you need to get a loan for a home, car, or business expense, your interest payments can be exorbitant because of a poor credit score. 

A financial planner can help you create a repayment plan that not only feels doable but also helps you pay down the principal, not just the accumulated interest. 

It might also be prudent to explore your relationship with money. A poor relationship can lead to: 

• Emotional spending
• Debt accumulation
• Poor saving habits

Improving your money mindset is one positive step you can take to build your confidence around money and change your spending habits for the better. 

 

5. Set up a retirement plan

Planning for retirement is something that you should start doing now. Do not wait until you’re 40 or beyond. Start putting money away now so it has time to accrue, and you can thoroughly enjoy your retirement years.

 

Some options for solo entrepreneurs include: 

• A solo 401(k)
• IRA
• Simple IRA
• SEP IRA

Talk to a financial planner to determine which option is best for your unique needs. 

 

6. Don’t wait until April to work on your taxes

If you wait to work on your finances until tax season, you’re going to be stressed. Here are some steps you can take on a regular basis, throughout the year. Following these tips will make paying your taxes and planning for your financial success even easier. 

• Set aside 30% of your income for taxes before you pay any other bills
• Keep track of 1099-MISC and W-9 forms
• Consider switching to an S Corp instead of a sole proprietorship 
• Invest in an accountant and tax professional

 

Don’t wait—take control of your finances today!

Financial planning may seem daunting at first. But with some practice and patience, you may find that you start to feel more comfortable and competent when it comes to your finances. 

Thankfully, you do not have to do it on your own. You can find several resources pertaining to financial planning for solo entrepreneurs, such as investing in an online class. You can also consult with financial professionals in your area or online. 

There is no shame in asking for help. Doing so will help take some of the pressure off and help you become a financial success even faster. 

Are you ready to start earning money as a solo entrepreneur? Schedule an interview to learn more about Vector side gig opportunities.