FINANCIAL SECURITY FOR THE SELF EMPLOYED AND CONTRACTORS
The trend of more flexible work arrangements is becoming increasingly popular as more people work as contractors rather than employees.
The benefits include building a wide range of skills, flexibility around children or allowing time to travel. The downside includes no superannuation, annual leave and sick leave and no consistency of income.
Here are a few tips to ensure you make the most of your contracting dollar:
1. BUILDING A CASH BUFFER
Building and maintaining a cash buffer is critical as a contractor. It is a good idea to have about 3 - 6 months wage up your sleeve. This may seem like a lot and hard to achieve. One step at a time. Work towards it as it will give you peace of mind should you be faced with the unexpected.
2. MAKE SURE YOU ARE PAID WHAT YOU ARE WORTH
Ensure your hourly rate covers an allowance for holidays, sick leave and superannuation. Have you researched your going rate in the industry? Know your minimum fall back position in pay negotiations - know whether to accept a less than ideal contract or walk away.
3. MAKE THE MOST OF TAX DEDUCTIONS
Keeping receipts for home office supplies or for a laptop that you need for work may be a valid tax deduction. Depending upon how you are paid and where you regularly work, some of your travel costs may even be tax deductible. Have a chat to your accountant or consult the ATO website for the range of costs that might be tax deductible to you.
4. KEEP NETWORKS & SKILLS FRESH
It will be your responsibility to invest your own money in the occasional course to make sure you are up-to-date. LinkedIn (like it or hate it) has made the job of keeping in touch and extending your professional network much more straightforward. LinkedIn allows you to stay connected with colleagues and associates long after they leave their current employer.
Contracting, like any form of self-employment has its ups and downs. The flexibility and freedom does come with some barriers and uncertainty, but that doesn’t mean you have to forego your financial security and independence. Some things that are worth going after, may take a little more work and planning.