Money Sense for the Self-Employed

By Rick Shaffer

With the shaky state of the economy in recent years, employment remains a concern for many Americans. People continue to lose their jobs, while many who are employed remain concerned about the prospect of being laid off. As a result, more and more people – either by choice or necessity – are considering earning their living through some form of self-employment.

So, whether you’ve been downsized, fear you soon may be, or have simply decided that you’d prefer to be your own boss, here are some key financial issues to keep in mind.

Emergency Funds

Try to have as large an emergency fund as possible to fall back on. This sum of money should be kept in a safe, liquid account to guarantee that the full amount will be there and easily accessible if and when you need it. Generally, you should have an emergency fund equal to five to seven months of living expenses.

However, for the self-employed, an emergency fund of eight to 10 months of living expenses is preferable.

Budgeting