A freelancer’s guide to smart investing
“Should I bother with money management if I don’t earn a regular income? I am self-employed/ I am a consultant/ I am a freelancer, I cannot relate to the usual money and investment discussions others have.“
These are statements I get to hear often. Did you know that India has over 1.5 crore people working as freelancers? Second only to the US, with a significant number of them being women.
For all women who are in the same boat – with irregular incomes – who wonder whether they should be thinking of investing – here is my one-word answer – YES!
Can anyone else live your life for you? If your answer is NO, then your money is your business. Basis exists to help women, all women, take charge of their money. Taking charge of your money becomes all the more important if there is uncertainty regarding the inflow of funds.
Also, without a regular job, you may be free from a lot of stress, but you are also without employee benefits. So being able to extract the biggest bang for your buck becomes all the more crucial for you.
You might have months where there are sizeable amounts of money coming in freely from payments due and months where all you’re probably doing is following up on money due to you.
Here are some easy-follow-through suggestions of how to take charge of your finances for self-employed women and freelancers:
1. Insurance is a must
Not working for an organisation full time means that you have to look after yourself. Get a good health insurance policy as well as a good term insurance policy. The premiums for both these kinds of policies are not too high. Especially if you start when you are younger and they can be tailor-made to your needs. This is one expense you simply cannot do without given the rising costs of healthcare.
Do your research and opt for the policy that best suits your unique requirements. Today, there are insurance policies that give insurance against not just death, but also disability and disease. So shop around before you commit. In addition to your own policy, do check if you are eligible to be covered under health in your spouse’s corporate policy.
2. File your taxes
Even if you are not working full-time, you will be liable to pay taxes. However, as a self-employed individual, you are also up for certain exemptions as business expenses. Understand your tax liability from a good accountant. Once it is clear as to what your tax liability is, plan for it at the beginning of the financial year.
Given the fluctuating rate at which your income comes in, park your money in liquid funds. Whatever small amount that comes in, let it accumulate in a liquid mutual fund till it becomes a substantial sum.
Let your ₹10,000 – ₹30,000 sums accumulate to ₹50,000 – ₹1,00,000 and then redirect to a tax saving mutual fund or your PPF account. It is important to have this money so that at the end of the year you are not scrambling for funds to save tax.
As a freelancer, you may not have a regular, fixed income, but that does not mean your expenses are not fixed. In fact, not only are your expenses definite, but there are also going to be emergency expenses.
Building an emergency fund cannot be stressed enough. You must have money equal to six months of your budgeted expenses in your emergency fund. Have this corpus in hand before you quit your job to live the freelance or self-employed life.
4. How do I plan my SIPs?
Without a regular income, planning a Systematic Investment Plan becomes rather difficult. Instead, plan your investments through Systematic Transfer Plans or STPs. As suggested earlier regarding catering to your tax expenditure, accumulate your earnings in liquid funds and when you have a substantial amount, you can use an STP to put that money in a diversified equity fund to feed your retirement or children’s education fund.
5. Keep business and personal expenses separate
It is a good idea to have separate accounts for money that you want to keep for investing and the money you want to use for building your own business or other work-related expenses. This way there is a clear demarcation of funds and you can grow your business at a rate that is practical without putting too much pressure on yourself and denying yourself the fruits of your labour by being forced to skimp.
Salaried or freelancers, there are different struggles when it comes to investing, none that can’t be overcome.
Want to grow your savings ? Download Basis, an investing platform focussed on women.