Solopreneurs really can (and should) save for the future. Here's how.
Smart Money
Tags:
Save, Retire, Compounding
Heather R. Johnson
Nov 09, 2018

Whether you’re freelancing temporarily or diving headfirst into the business world, it takes planning and practice to balance your budget in the gig economy. You don’t have an employer to pay your taxes, cover health insurance costs or manage your 401(k). And you still have to pay rent, buy yourself dinner and keep your cell phone in service. It’s a lot to manage even for veteran entrepreneurs. But by keeping your expenses low, you can steer your ship in a profitable direction. Here are a few ways to get started.

1. Open your own 401(K)

Even if you’re decades away from retirement, it’s important to set aside a portion of your income for those post-career years. Consider this: start saving $200 a month at age 25 and by 65, assuming a six percent rate of return, you’ll have $402,492 in your retirement account. Wait ten years and the nest egg drops to $203,118.

As a solopreneur, you have a few options: a SEP-IRA, a SIMPLE IRA or an Individual 401(k). Each plan has its own requirements, but all three allow you to contribute substantially more than a Traditional or Roth IRA ($5,500 for adults under age 50).

How does this save you money? Your retirement contributions aren’t taxed, so the more you contribute, the lower your taxable income. Set up your account to automatically withdraw as much as you can afford each month from your checking account. You won’t miss it—and you’ll thank yourself in the long run.

2. Budget for health coverage

Americans spend $440 per month on average for an individual high-deductible health plan according to eHealthinsurance. That’s a huge bill to swallow when you’re paying it all yourself.

Depending on your income, you may qualify for a subsidy that covers a portion of those costs. Use the IRS premium tax credit tool to find out if you qualify.

To get health coverage while growing your business, consider working part-time for a company that offers benefits. Whole Foods, Starbucks, Costco, UPS, Home Depot and others offer benefits to part-time employees. Consider it a side hustle for your side hustle.

3. Use low-cost marketing and advertising strategies

Solopreneurs have more ways than ever to market their services at little to no cost. Create a Facebook page, Tweet often and launch an Instagram promotion. For example: “Post your pic using hashtag #myawesomebusiness and get 20% off your next service!”

Need a website? Platforms such as Wix, Squarespace and Google Web Designer allow you to create quality websites for free. They’re simple enough for beginners to use and come with advanced features like online stores, ad-building and video.

Are there popular blogs in your niche? Offer to write a guest post. Is there a conference coming up or relevant Meetup groups in your city? By all means, socialize. In the sharing economy, you can promote your business without spending much cash.

4. Set and follow a budget

To keep your spending on track, you have to, well, track it. Create and follow a budget so you know what you spend and where you can cut.

The less you spend, the more money you have to invest in your business, save for retirement and take a vacation. To track income, expenses and send invoices, choose your favorite app with budgeting and accounting tools.

5. Live more frugally

Track your spending—all of it—for a month. Is there something you can buy less of? By cutting back on nonessentials such as dinners out, pricey gym memberships and high-end skin cream, you can save hundreds of dollars each month. Here are a few ways to save:

• Eat in. According to the Bureau of Labor Statistics, Americans spent about $263 per month on restaurant and take-out meals in 2016. Swap dining out for simple meals at home.

• Do you need a grande low-fat latte every day? You’re spending about $100 a month on joe. You can make excellent pour-overs at home with a $6 filter cone. Save the lattes for an occasional treat.

• Cut the cord. If you’re still paying for cable or satellite TV, shop around for a better deal. You can likely get everything you want from your favorite streaming services and/or devices at a fraction of the price.

You have a lot on your plate as an official gig economy member. With a little planning, you can work for yourself, keep the bills paid and save for the future. HINT: Our Cogni app can help.

 

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