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Financial Planning Tips for Self-Employed Individuals

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Financial Planning Tips for Self-Employed Individuals
November 28, 2022

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Financial Planning Tips for Self-Employed Individuals

Many individuals believe that emergencies won’t affect them. This complacent attitude is common, not just among the Indian diaspora, but all over the world. Attitudes are changing, but very slowly, only because of the crises people have faced in the past few years. Thus, the consideration of the need for financial planning may have hit home finally. However, in the hustle and bustle of life, and the false idea that you need a lot of wealth in the first place to invest, people put off planning for the future.

Although many individuals think of financial planning, they are lax when it comes to actually formulating a plan and executing it. In the most basic way, making a plan involves evaluating your current financial situation and your future financial goals. Then, keeping this in mind, you should have a plan to build a corpus. People have financial milestones to reach in the course of their lives, like paying fees for a child’s education. Furthermore, as mentioned earlier, medical emergencies or any others that involve monetary requirements may crop up and leave you financially drained.

Why Financial Planning is Important for the Self-Employed

Financial planning is a crucial life activity for all individuals, irrespective of gender, age, or income. This is largely because one cannot predict what the future holds. Furthermore, the earlier you think of your financial plan the better, as you have more time to create wealth for the long run, like planning for retirement, for instance. Although salaried individuals may not be faced with unpleasant surprises as much as other income groups, the loss of employment is all too common. An even more serious reality is the loss of business of a self-employed person. Businesses, especially small ones, have had to shut down in the past couple of years.

For those individuals who rely solely on their businesses as sources of income, financial planning is the only way to combat inflation and other emergencies. Business incomes may be regular when times are good, but things can easily take a turn for the worse as such incomes are not regular. If you do not have a consistent income to safeguard yourself and your family, financial planning and collecting a corpus for your rainy days is vital.

Handy Tips to Have a Sound Financial Plan if You are Self-Employed

Where do you start if you wish to have a financial plan and start putting it into action? Here are some tips if you are self-employed:

  • Plan your Budget

    The first thing you should do is to categorise your earnings into requirements, desires, and savings. Based on the average income you are earning from your business, you can calculate amounts you need for each category.

  • Separate Accounts

    If you are a businessperson, you should ideally have a separate business account and a personal bank account. This way, you get certain facilities, like credit for your business and know how much to spend from your personal account.

  • Make a Plan

    Once your income is separated, you know exactly how much to allocate to investment and planning for the future. You should be aware that financial products like insurance, both life and health insurance, are part of the category of needs, not savings. Savings can be further used to invest in other instruments like FDs, stocks, etc, for wealth growth.

  • Purchase Plans

    Setting aside your funds to pay premiums for solid life insurance and pension/retirement plans is a good way to meet financial contingencies in the future. For instance, HDFC Life’s Retirement and Pension plans help you save for the long term, and some life insurance plans give you cover and grow wealth too. Retirement plans like the HDFC Life Systematic Retirement Plan allow you to save systematically for your golden years with flexibility to choose your premium payment term, Deferment Period and choose your annuity pay-out date.

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ARN: ED/11/22/30282

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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