Paying off debt when your self employed

Paying off debt when your self employed

Being independent has many advantages. Being your boss means having the freedom to work as you wish, to do what you want when you want it. There are no demanding supervisors to dictate each of your movements or look like an eagle hoping to jump on you. But there are also disadvantages in terms of self-employment. One of the most important is the cash flow that can generate an uneven income.  But the fact that your income is irregular does not mean that you can only pay your bills when you want. This can make it difficult to establish and maintain a budget and debt repayment while running your own company.

After starting your business, try and manage to increase your monthly income as little as twice more than you earned in your daily work. This unlimited revenue potential has helped many pay off their debts and save more money. But the truth remains that the situation will be tense especially when you are a start-up and that sometimes comes with a credit card debt with high interest rates.

Fortunately, with a small strategy, you can pay off your debt when you are self-employed. Try to apply some of the steps mentioned below.

Calculate your final expenses

Even if your income is unusual, your expenses are usually. You may realize that in practice you need the same amount every month for meals, utilities, housing, transportation, minimum payment, and so on. 

Levels of cash flow problems

The first step in aggressively reducing your debt when you are self-employed is to put an end to cash flow problems. When you are the boss, cash is at the heart of your business. You must eliminate inconsistencies in self-employment income by applying simple cash flow strategies.

Some strategies to start are:

Get faster payment: give a discount to customers who pay up to ten days after receiving the invoice. Give them a lot of options to pay your bill by credit card, check or PayPal.

Automate invoices: Use an automatic or periodic billing system to spend less time on administration tasks.

Request in advance: Ask customers to prepay up to 50% of the value of the project. Set deadlines and late fees if you are not paid on time. Do not waste your time looking for payments.

Increase sales of other services: Focus your efforts on current customers and develop them into your services.

Increase rates: negotiate a higher price with existing customers. Enjoy a birthday or a high income generating project.

Leveling your income can also mean getting a part-time job. Or sign up to work as an independent contractor for a repeat customer. Be open to doing something that helps you to help your income and create more significant cash flow.

Learn to spend with an irregular income

Having an irregular income does not mean that it is not possible to budget! It merely means that you need to think a little more because you do not have a fixed amount that you know you will receive every two to four weeks. Having several budgets can help to control your expenses better, depending on whether your company's revenue goes up or down from one month to the next.

Cut your monthly expenses

Have you recently reviewed your monthly lists? It's easy to sign up for Netflix, but do you use what you pay for? One way to reduce your debt is to reduce monthly payments or recurring expenses that you no longer need.

You pay debts several times a month

Another security feature you can use to help pay your debts when you have an irregular income as an entrepreneur is to pay more debt per month. For example, you only pay the minimum payment for each of your debts at the beginning of the month.

If you do not have the average monthly income, you can rest assured that at least your minimum payment obligations have been met, without the need to apply for a loan, on your own or urgently, to cover your bills. I hope that's never the case, but the uncertainty of self-employed suggests that you could do it.

Become an employee

Once you have created your budget and your average budget, you have a clear idea of the amount of income you have to live each month. Instead of paying more or less every month and making savings, if you are in a difficult situation, consider yourself an employee by paying a fixed amount every two weeks. This will help you get a more stable income. It also resembles the idea of living with last month's income, which is a good strategy for the self-employed.

So, whenever you accumulate a large income surplus, you can pay the debt, you can offer a bonus or an increase.

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