Being Self-Employed - Planning for all Eventualities

Photo by Corinne Kutz on Unsplash

{This is a collaborative post}

I became self-employed back in the Spring of 2013 and in many ways, I have never looked back. It provides me with the flexibility I never had when I was traditionally employed. As a mother with a growing family, it allows me the freedom to be there when the kids need or want me, to be able to volunteer for charities and my church and to just take an afternoon off if I fancy a walk in the hills with my husband. 

There are so many advantages to being self-employed that I'd be hard-pressed to name them all, but there are also a few worries that come alongside it. Thankfully we live in a house that comes with my husband's job and this takes away some of the financial pressure that we used to face when we had a mortgage, utility bills and council tax to cover.

I've happily gone along over the last few years, enjoying our lifestyle and spending the money I earnt on family holidays, meals out and some nice treats for the kids, but the events of the last year have really made me think about how protected we are as a family for all eventualities. Of course, our faith is in Jesus as we are Christians but we're told in the bible to have faith and also to take steps forward and to do the footwork.

So, recently I've been looking at our family's finances and the plans we have in place for if the worst was to happen. The areas I have been reviewing are -

Income Protection Insurance

If I was to fall ill or get injured and we lost my self-employed income we'd certainly feel it as a family. Thankfully we'd still be able to pay our bills and eat but our lifestyle would rapidly deteriorate as the girls wouldn't be able to have their trendy trainers, our odd takeaway would be a thing of the past and our holidays would be in our own home. 

Once we move out of our current home and we either buy or rent a property again, then my becoming ill and the loss of my income would probably have a far more detrimental impact and we may find ourselves not being able to pay the bare essentials like the gas bill, or having enough to buy food. That kind of situation doesn't bear thinking about and to be honest, I don't need to as I could ensure that even if I fell ill or got badly injured we could still have a similar amount of money coming in each month if we take out income protection insurance.

Income protection insurance will usually pay out between 50% and 70% - and the cost of a policy depends on your age, job, your health and lifestyle and the percentage of income you’d like to cover.  When self-employed and taking out an income protection policy, your monthly income is based on your share of the pre-tax profits generated by your business.

Pension Provision

The ONS says that in the 35 -54 years age group 45.1% of self-employed people do not have any private pension wealth and that is a shocking figure. Whilst I do have some pension wealth, as I paid into an employer's pension for 16 years, it is nowhere near enough and I need to get a new plan started and pay into it regularly. 

I've booked a free midlife review for self-employed people with The Pensions Advisory Service and I'm looking forward to finding out what I can do to help myself have a good and secure future, as one thing is for sure the state pension will certainly not be enough to allow me to live a comfortable (not even lavish) lifestyle.

Keeping  an Up-to-date Will

If the worst were to happen, it is so important that you have an up-to-date will in place so that things run smoothly and your estate doesn't have to go into probate unnecessarily. If you are a sole trader you'll need details of who any outstanding invoices should be paid to and how to go about accessing your database and accounts to ensure that any monies are recovered and dealt with according to your wishes. 

I've diarised to review the details in my will every five years so I can change things if necessary and ensure that when the time comes, my husband or my children are able to administer my wishes in my will without it being a massive headache for them.

Photo by Green Chameleon on Unsplash

Spending & Saving Review

The slower pace over the last year has allowed me time to sit down and do a full review of our family's spending. I've created a yearly spreadsheet with all our outgoings and projections for my income as well as my husband's. I've also used comparison sites to ensure we are on the best tariffs for our internet, mobile phones etc. Evaluated how much we spend on food and whether we can shop more efficiently and took some advice as to what to do with our savings. 

It has been such a good exercise and I've been really pleased to see that small changes can make a big difference. For example, we moved to a plan to pay monthly for our car services and this has saved us about £200 over three years. We also signed up for some passive money-making/ saving apps like Airtime Rewards and Quidco and it's good to see the money add up each quarter.

It is so important to think about the bigger picture when you decide to go self-employed and to be honest, at the start of this journey I didn't really think through too many aspects. I had assumed it might just be for a year or two, but here I am eight years later and with no change in sight, so thankfully I have now chosen to get all my ducks in order and to review my situation, make some changes and plan better for the future.

All the best to you as you do the same. Mich x