You’re self-employed and want to make the most of your finances. What’s the first step you should take?

1 Set up a separate bank account

One of the most important things you can do to simplify your financial management is to set up a separate bank account for your business income and expenses. This way, you can easily see how much money you're making and spending, and avoid mixing your personal and business finances. Having a separate bank account also makes it easier to file your taxes, as you can easily access your records and receipts. Plus, it can help you establish your business identity and credibility with clients and suppliers.

3 Track your cash flow

Once you have a budget, you need to track your cash flow regularly. Cash flow is the difference between the money that comes in and the money that goes out of your business. It shows you how much money you have available to pay your bills, invest in your business, or save for emergencies. To track your cash flow, you need to record your income and expenses, and compare them to your budget. You also need to invoice your clients promptly, follow up on late payments, and plan for seasonal fluctuations.

4 Set aside money for taxes

As a self-employed professional, you're responsible for paying your own taxes, such as income tax, self-employment tax, and sales tax. Depending on where you live and how much you earn, you may need to pay taxes quarterly or annually. To avoid penalties and interest, you need to set aside money for taxes every time you receive income. You can use a tax calculator or consult a tax professional to estimate how much tax you owe, and save it in a separate account. You can also reduce your tax liability by claiming deductions for your business expenses.

5 Build an emergency fund

Another smart move you can make to improve your financial management is to build an emergency fund. An emergency fund is a savings account that you can use to cover unexpected expenses or income loss, such as a medical bill, a car repair, or a client cancellation. Having an emergency fund can help you avoid debt, stress, and cash flow problems. Ideally, you should aim to save enough money to cover at least three to six months of your essential living and business expenses.

6 Seek professional advice

The final step you should take to make the most of your finances as a self-employed professional is to seek professional advice. Working with a financial planner, an accountant, or a bookkeeper can help you optimize your financial strategy, manage your taxes, and plan for your future. A financial professional can help you set up your accounting system, review your financial statements, advise you on your retirement options, and answer your questions. You can also use online tools and resources to learn more about financial management and best practices for your industry.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?