Are there any self-employed DFW's here?

Toto

Cashflow is a bloody headache, we are both self employed and we find that it's either feast or famine. We never know when we'll get paid, sometimes we can wait 3-4 months and things do get tight, but then a whole bunch of stuff goes into the bank and we're ok again. We're lucky that we're now in a position to have savings but that only happened because we sold the house to pay all business and personal debts. It's a nightmare and I fully sympathise.

TurnaroundSue

Hi M-of-3 - I am self employed and take the same amount out as wages each month. I then keep the rest to build up in the business account and it helps then if I have a lean month. Having said that, my OH is on a wage which covers all the bills, mortgage, petrol etc and then my money is what we live off. I always have thought how hard it must be if both of you are self employed or the main breadwinner is s/e as it just makes things alot more difficult. I do keep my business money entirely separate from my personal, and this makes things alot less complicated. If you are an fsb member then you can bank with the co-op for free so long as your income isn't more than £4k per month and that really helps, as having a business account can really be expensive.

Good luck - I don't have any ideas/suggestions for you unfortunately, but send you a :grouphug:

neverdespairgirl

Both OH and I are self-employed. We know well the difficulties of budget planning, and saving up for tax!

I think it's very important to separate business (tax deduction stuff) and personal finance, otherwise it's extremely hard to get a handle on things.

OH and I both have a business account, and a personal current account each, and an on-line saver, all with the same bank (Lloyds, in our case). I'm using "I" from now on, although we do it in the same way. All work cheques go into my business account, and when they clear, are transferred directly in the on-line saver. I keep a small "float" in my current account, so that DDs, cash withdrawals etc, don't send me overdrawn. I have no overdraft on the business account or, obviously, on-line saver, but have a £6,000 overdraft facility on my personal current account.

I spend pretty much most of our domestic money - I pay for the childcare, and all the bills (rent, utilities, car, etc). So OH transfers money over to me regularly, which is again pretty easy because all the accounts are with the same branch. If I get a large cheque in, I transfer some of it over to OH in order for it to go in a higher-rate savings account for the longer-term, and tax.

I then have 2 credit cards. On one goes all my business expenses - equipment, travel, books, etc. On the other goes all personal expenditure. These cards are cash-back cards, which helps of course! I pay credit cards off every month, in full, even if that puts me temporarily overdrawn.

I find the danger with being self-employed is that on "normal" months when you get small and few cheques in, you keep up your normal expenditure. And on months where you get a nice lot in, it's too easy to celebrate and overspend.

We draw up a budget, and stick to it. Start with the realistic post-tax income you'll have, minus your rent / bills / food / childcare / etc , and work out, on average over the year, what your monthly leftover income is. Separating personal income and expenditrue in this way is, I think, essential to have any self-employed grip on money.

Once you have your post-essentials monthly income worked out, knock 50% off it to allow for late payments, credit charges, emergencies, etc, a safe zone.

For example, say your joint realistic post-tax income for a year is £17,000 (incl. child benefit etc). That's £1,416 per month.

Then knock off essentials, for example, rent £500, all bills £80, childcare £150, food and toiletries £200, leaving £486 a month. Knock off car costs, £200 a month (everything), leaving £286 a month. This is for *everything* else, Christmas / birthdays / haircuts / days out.

Knock 50% off for the safe zone, and you have a budget of £143 a month. You can either take this as a whole, or decide to split your budget into the different discretionary catagories as above.

This is how we do it, anyway. The above figures are plucked out of the air, purely to give as an example!

Mum_of_3_3

Thank you all so much for your replies and suggestions

From now on I'm going to transfer over a set sum every month and everytime my OH gets a cheque (and it clears!) I'm going to pay off the materials element from the Credit Card straight away. I'm also going ot invest in MS Money once we get some spare cash as it looks great with the scheduling of payments etc (thanks Gemmzie).

I suppose the problem we've had as well is that my partner has earnt just enough to pay the household bills but not really anything else besides, so any days out etc have been paid for on the CC in a roundabout way.

I started my job at the beginning of the month & I'm putting in my first invoice at the end of Feb so I'll get on the right track immediately & save 25% of the total for tax. I know that if I earn £10k 25% of every bill would be too much, but hopefully then I'll have some to put towards the OH's!

Thanks again for all your suggestions and support. All our friends are employed so it's great to know after all this time we're not the only ones :beer:


M_o_3


PS: gibbyni we've asked our accountant about going Ltd, but he said something about there being a tipping point where it becomes ineffectual and apparently OH's profits hover around this tipping point :rolleyes: . Thanks for the support though

neverdespairgirl

It doesn't have to be too scary - I grew up in a family where my Dad was self-employed, and my mother didn't go back to work until I was 17. So I saw it being done, and my mother has told me (many times LOL) that it's important to budget carefully being SE.

fc123

Hi M of 3....we've been S/E (fully liable) for 22 yrs and I have always wanted a "proper job"!
For many yrs, I did the regular draw each wk into another account, leaving the rest in the business account and we were always pretty strict about not overspending at Xmas, say, as Jan / Feb is horrendous...however had several disasters and crisis' (incl a bad debt to us of 50k ) in 2003/04 and ended up with a debt mountain.



It's easy to budget when one knows what is coming in, but with variable income, it's a nightmare.

I found Alvin Halls book helpful (he is S/E) .

He suggests an annual budget which I now do, instead of monthly, and it has really helped our cashflow.

Hope this helps!

Conor_3

Regarding the income thing, you need to work out how much you need every month to meet the bills. Out of the business, pay yourself no more than this. This should leave sufficient over that you can pay yourself when there's no money due in. It allows me to still pay myself when it's quiet from Jan to March and I've got enough now to manage without an income for about 6 months.

bountiful

Hi - just skipped over to your thread to thank you for what you posted on my thread about not giving up college/degree etc. With the help of a couple mates I have got it back into perspective and made a practical plan of work which means - I am continuing! Thanks for the encouragement.