Income instability? Strategies for the self-employed
Income instability is a reality for the self-employed. If there is a large inflow of money in a few months, it is very likely that there will be almost none in other months. For example, if we decide to take a vacation, it is very common for income to be zero or almost zero this month.
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And how can we handle it better?
First of all, the first thing you have to do is accept reality.
It is still true that those who work alone live with income instability and should be so. Therefore, your goal should not be to change this reality or find a strategy so that the cash inflow is the same every month.
If income stability is very important to you, you have your own job. Someone else will probably be the best option available to you. However, if you really want to commit yourself, you have to accept the instability of the income and the fact that you have very good months and others with almost no income.
But what can you practically do to learn to live? this income instability with ease?
1. Creation of a Freedom Fund
Most people refer to this fund as an “emergency fund”, but I prefer not to use this term because I don’t want to associate this value with a situation of extreme hardship.
I prefer to see this fund as something that gives me peace of mind, something that I may have saved to know that I can rest when there is a month in which I do not register money – especially for reasons that I didn’t foresee – because I have the money there, this freedom fund. This means that I will continue to have freedom of administration this month, with little or no cash inflow.
The value of this Liberty Fund always depends on you and what you are comfortable with. There are people who like to have a freedom fund with a value that corresponds to 6 months of work, others a year. And others less. The amount must be determined by you. The most important thing is that you have part of a value that brings you this security.
2. Pay Yourself a Salary
Doing so will help you better manage your cash flow.
In a month in which you start a new group program or an online course, for example, it goes without saying that there is more input from money. Knowing that this will not happen again next month, you cannot consider the total amount you received with this start as your salary for that month. The amount received by this introduction to your company should then be used to pay your salary this month and in the following months. With this strategy, you can see that the value accruing in a particular month should not be the money that you will actually be spending that month. The money that goes into your business must be well distributed.
3. Medium-Term Planning
This strategy helps you better manage your cash outflow.
Suppose you are now opening a group program that will last 3 or 4 months. So you already know that you will open a new program in at least three or four months. So if you are well structured in the medium term – at least 6 months – you know that the amount that you now enter with this group program will not return in this ratio in the next 3 or 4 months. With this planning, you can better manage cash outflows by knowing when to expect a larger cash outflow again.
4. Reinventing Your Own Business
In an early phase of your business, investing in your business is the one that brings you the greatest return. If you are just starting out, it means that your company has enormous growth potential. Therefore, nothing brings you a higher return than a (re) investment in your own company.
Do this planning and predict what percentage of your profit you will reinvest. Whether in tools, employees or additional training courses, new programs, new courses or coaching. This (re) investment will bring you results and consequently increase the size of your business.
These are the suggestions I have for you on how to better deal with income instability. I hope you will find them useful.
Now I would like to know whether it was difficult for you to deal with income instability in your company. Which of these suggestions that I made is the most useful for you? And do you already know which ones you will implement?
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