4 Financial Hurdles Self-Employed Professionals Face (And How To Tackle Them)

While self-employed individuals have the freedom to make their own schedules and don’t have long commutes, they face challenges organizing their finances that their full-time, W2 counterparts don’t. Regardless of what field of work you’re sel

Benzinga · 01/21/2020 16:28

While self-employed individuals have the freedom to make their own schedules and don’t have long commutes, they face challenges organizing their finances that their full-time, W2 counterparts don’t. Regardless of what field of work you’re self-employed through, it’s important to keep track of all expenses that you accrue for tax deduction purposes.

By the very nature of being self-employed, you aren’t eligible for any employee health care or 401k benefits programs. Since self-employed individuals don’t receive employee benefits, they must take ownership of their financial future in ways traditional full-time employees can take for granted. The power to make the most of being self-employed is in your hands.

The following are four financial hurdles self-employed professionals face and how to tackle them.

1. Retirement Funds

Without guidance or support, planning for your future is often painted as a stressful and lengthy task. Since you don’t work for an employer, you don’t have the option to contribute a part of your earnings from your check into a 401k or have employer matching; open a ROTH IRA (individual retirement account where contributions are after-tax so withdrawals are tax-free) and deposit money on a weekly or bi-weekly basis.

Find a financial advisor to help guide and support your financial goals via a Roth IRA.

2. A Mortgage

If you’re self-employed and want to own a home, a great place to start is working with a mortgage lender who lends without requiring a W2 during the lending process. Luxury Mortgage offers bank statement only loans and specializes in working with self-employed individuals.

Luxury Mortgage understands there is no such thing as a one size fits all mortgage, which is why they offer fixed-rate, adjustable and hybrid adjustable loans to qualified homebuyers. You can obtain lending via Luxury Mortgage in the following states: California, Colorado, Connecticut, Washington DC, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, North Carolina, New Hampshire, New Jersey, New York, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Washington.

Click here to get in contact with Luxury Mortgage.

3. Health Insurance

A tell-tale sign that you’re self-employed: a health insurance plan isn’t something that’s offered to you, so you have to go out and find one! Finding health insurance when self-employed can be a bit of a pain process if you’re used to being offered a menu of PPO or HSA plans via your employer.

Depending on your health insurance needs, and whether you prefer having a lower monthly premium as opposed to having a lower deductible, finding a plan that works for you can be a tall task if you haven’t had experience shopping around for one. But know that finding a health insurance plan when self-employed doesn’t need to be difficult and you can actually turn the process of finding a plan from a hurdle into a positive by finding a plan better tailored to your needs.

The fact that you get to choose health insurance from a marketplace of options when self-employed, as opposed to the offerings from a company, should give you peace of mind when it comes to your health care needs.

4. Staying On Top Of Bookkeeping

If you’re newly self-employed, know that your bookkeeping methods are crucial to determine not only your current year’s taxes but also all tax deductions you may be eligible for.

There’s no question- keeping track of financial records when self-employed can add a large number of unexpected hours to your workload. When you’re your own boss, the task of keeping track of business expenses falls squarely on your shoulders.

However, there are online tools and software that can help make the process of bookkeeping way less daunting for you and your business ventures. Take advantage of popular bookkeeping tools that can help you plan for taxes and in turn shine a spotlight on tax deductions. Also, did you know there are tax deductions that exist specifically for you if you’re self-employed?

With Great Responsibility Comes Great Power

With a proactive mindset, the four hurdles we’ve covered for self-employed individuals don’t need to be hurdles at all. In fact, being your own boss can mean increasing your financial IQ and discipline surrounding your money. One big takeaway: the process of setting savings goals lends itself to creating an accurate budget for personal and business-related expenses when you’re self-employed. What better way to take ownership of your savings than by being proactive and planning for the future?