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Cardwell Management Services UK Limited
Regency House, 45-51 Chorley New Road, Bolton, BL1 4QR
Cardwell Management Services UK Limited
Regency House, 45-51 Chorley New Road, Bolton, BL1 4QR
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What's the impact on my personal finances?
You can expect two significant changes to your personal financial position;
1. the level of income should increase - it is likely that you will earn more as a freelance contractor than you have previously as an employee, but
2. you will need to get better at planning your finances because as a freelancer, you will no longer get paid holiday leave, sick pay and you need to build enough of a buffer to take account for periods when you are not in contract.
Experienced contractors have learned the lesson all too often of the need to build up a reserve of cash to cover your expenditure when you're not in contract. Many set up saving schemes and transfer a fixed percentage of their fees each month to ensure that they have at least enough cash available to cover up to 6 months living expenses.
They have also realised the need to control their personal expenditure so that the level of savings required to fund 6 months can be built up quickly.
One thing to remember is that your business has expenditure each month also - you will need to continue to cover the costs of phones, vehicles, insurance etc - which will need to be accounted for when you're calculating the amount required as a buffer.
By building up a cash buffer you will protect yourself against the inevitable breaks in freelancing. You will never be forced to take an unsuitable contract and you will never have to worry too much about short-term breaks due to illness or circumstances.
You should seriously look at taking out Permanent Health Insurance to protect yourself against being unable to work for longer periods of time due to ill health. There is nothing worse than having financial concerns when you're trying to recover from a seruis illness.
Freelance Contracting is an attractive form of career if you have the discipline to do the things that we have been talking about. However, if your feel that you'd struggle to follow these simple steps, then you need to question whether contracting is for you.
As a freelancer, you have opened up the potential to earn more than as an employee. But this comes with extra responsibilities. Freelancing can be unstable. Rates are determined by market forces and can go down as well as up.Many freelancers suffer from the “ratchet-effect”. It is easier to expand your lifestyle to fit your expanding income than to contract your lifestyle to fit your shrinking income. You’ll sleep much easier as a freelancer if you know you’ve either got substantial savings and investments, or you are
living below your means by a comfortable margin.
Sit down with your Accountant or Financial Adviser to plan how you can allocate your fees to ensure that you can enjoy the fruits of contracting without the worry of a poor harvest.
See Also
Managing your Cashflow
Pension Planning
Taxation
Your Credit rating
Recommended Links
1. the level of income should increase - it is likely that you will earn more as a freelance contractor than you have previously as an employee, but
2. you will need to get better at planning your finances because as a freelancer, you will no longer get paid holiday leave, sick pay and you need to build enough of a buffer to take account for periods when you are not in contract.
Experienced contractors have learned the lesson all too often of the need to build up a reserve of cash to cover your expenditure when you're not in contract. Many set up saving schemes and transfer a fixed percentage of their fees each month to ensure that they have at least enough cash available to cover up to 6 months living expenses.
They have also realised the need to control their personal expenditure so that the level of savings required to fund 6 months can be built up quickly.
One thing to remember is that your business has expenditure each month also - you will need to continue to cover the costs of phones, vehicles, insurance etc - which will need to be accounted for when you're calculating the amount required as a buffer.
By building up a cash buffer you will protect yourself against the inevitable breaks in freelancing. You will never be forced to take an unsuitable contract and you will never have to worry too much about short-term breaks due to illness or circumstances.
You should seriously look at taking out Permanent Health Insurance to protect yourself against being unable to work for longer periods of time due to ill health. There is nothing worse than having financial concerns when you're trying to recover from a seruis illness.
Freelance Contracting is an attractive form of career if you have the discipline to do the things that we have been talking about. However, if your feel that you'd struggle to follow these simple steps, then you need to question whether contracting is for you.
As a freelancer, you have opened up the potential to earn more than as an employee. But this comes with extra responsibilities. Freelancing can be unstable. Rates are determined by market forces and can go down as well as up.Many freelancers suffer from the “ratchet-effect”. It is easier to expand your lifestyle to fit your expanding income than to contract your lifestyle to fit your shrinking income. You’ll sleep much easier as a freelancer if you know you’ve either got substantial savings and investments, or you are
living below your means by a comfortable margin.
Sit down with your Accountant or Financial Adviser to plan how you can allocate your fees to ensure that you can enjoy the fruits of contracting without the worry of a poor harvest.
See Also
Managing your Cashflow
Pension Planning
Taxation
Your Credit rating
Recommended Links