www.taxprofessionals.com - TaxProfessionals.com
Posted by Dennis Jao

Five Essential Ways to Pay Off Debt While Self-Employed

Five Essential Ways to Pay Off Debt While Self-Employed

Being self-employed comes with a lot of tax advantages. Aside from tax advantages, it enables you to work as much as you want, doing what you want and when you want. There's no one to direct or shout at what you do. 

On the other hand, it comes with hitches too. Self-employed income is unstable, yet you must pay your bills when due. Tax is paid regardless of whatever time you received the pay or how much you were paid. The fluctuation makes it demanding to stick to the payment. Luckily, putting in some strategies may lessen the burden while self-employed. 

This article will list five essential ways to settle your debt as a self-employed.

  1. Quit Adding to Your Debt 

Some people keep getting into debt, but the ideal way to deal with debt is not to get into more debt. Before your financial plan, spending reduction, and so on can take effect, you need to avoid adding to your debt. You can decide to block your Mastercare or lock it somewhere. As a self-employed, debt is a hazard due to unstable income. As a result, you have unplanned expenses or spontaneous living. Either way, the best thing to do is to avoid adding costs and start looking for ways to cut costs or get a side hustle.

  1. Pay on Debt Multiple Times 

Because of irregular income, you can deal with your tax debt through installment payments. For example, you can agree to remit a convenience sum every month until completion. The method will help when you fall short of payment. The down payment you have made will stand for you. 

In the end, you don't have to borrow your emergency funds to cover your bills. On the occasion that you make more income during the month, you can add up another payment to finish the tax debt.

  1. Budget with Irregular Income 

Even with an unstable income, taxpayers can still operate on a spending plan. It only takes a little idea and discipline to achieve the result. Remember you don't have a payment plan as regular workers but working on two to three spending plans will keep you on track. Start by creating a solid spending plan and figure out your monthly bills and the debt. 

Now, divide the list into wants and needs. We all know the definition of wants and needs. Afterward, calculate the amount of income you must make each month. At least, you should know the figure you have been making to survive each month. However, every extra penny made should be channeled toward finishing your tax debt if you're on a strict debt issue.

  1. Consolidate High-Interest Debt

You can swap your high-interest credit card debt for a simple card with lower or 0% APR. Transferring the debt to this 0% card will reduce the rate at which your debt interest increases. Or you can consider taking a personal loan that accumulates lower interest to remit your other high-interest credit card debt. 

You reduce the interest paid on debt by consolidating and refinancing your credit cards. In addition, you'll be able to pay back in time and faster. Having many payment systems to settle your tax debt is better than having one monthly payment method. The method is also more convenient in getting the best out of your finances, giving you more time to focus on business as a self-employed.

  1. Targeted savings accounts

Another way to battle and avoid tax debt is to create a savings account. Self-employed people get into tax, mortgage, and credit card debt than those employed do due to fluctuating income. Having savings accounts will help you avoid tax debt. You can start saving a monthly emergency fund, business investment, new equipment, and whatever reason will motivate you to save. Keeping little money aside can be used to pay tax debt any month you come short.



Dennis Jao
Contact Member