We are delighted to welcome Dave Kavanagh Financial Companion who has agreed to be the first of our guest bloggers. We hope to run a series of guest blogs from people we have worked with that we feel can contribute to all the small business and self employed out there.
So the first guest blog is entitled:
“5 things the Self Employed Should Know”
For some people, being self-employed is a choice that they made after much consideration. For others, it may have resulted with less choice due to their circumstances, such as either being made redundant, or else changes in their employment that made their decision the lesser of two evils
- The removal of certain employment benefits: When employed in the PAYE sector, you may have had certain benefits that are no longer there for you. Employer pension contributions, death-in-service benefit, income protection and paid holidays, to name but a few. As self-employed, you may need to consider putting something in place to replace some of these, so as not to leave yourself too vulnerable. Although it’s unlikely you will be paid to take holidays, the right planning and budgeting can still make it viable to take breaks.
- PRSI contribution entitlements: If you had been paying PRSI at the A1 class, you had a number of entitlements, such as dental/optical benefits, disability benefit etc., whereas many of these do not apply to those paying the S1 class of PRSI. You may need to make adjustments in planning to allow for the cover you no longer have.
- Annual Tax Returns: Unlike those in PAYE that have most of their tax obligations taken care of by their payroll system, self-employed people need to keep all the relevant details in order to make their own tax returns each year. Depending on the type of business you are in, this can be quite cumbersome and time consuming and will usually require the assistance of either an accountant or bookkeeper. You will also need to plan cash flow so that you can pay the relevant tax bill on time.
- Expecting the unexpected: In the PAYE system, you work for a week/month and you get paid for that week/month. When you are self-employed, this is not always the case. Whether it is quieter spells of business due to the time of year, or whether other factors put a spanner in the works, such as extreme weather conditions, supplier failures or technical breakdowns, you may have spells where income is not sufficient for your needs. Planning your budgeting and keeping emergency funds aside for such occurrences can be crucial to the continuity of business.
- The impact on your personal life: Most people that are self-employed come to realise quite quickly that their day seldom finishes at 5:30pm or that they don’t automatically have weekends off. The demands can be unpredictable and unkind in their timing, often having an undesired impact on your personal life. The difference between having the luxury to make up for these kind of time constraints as opposed to being a constant slave to work, can once again be down to planning your finances. Giving yourself the choice and ability to be able to take “time-out” when permitted, can be down to what you have in reserves.
As with all of these points, taking a small amount of time to make sure that your planning is in order can make the path of the self-employed a much smoother one.
Dave Kavanagh from Financial Companion. Check out Dave’s other blogs on his website Financial Companion.