Self-Employed? How to Never Miss a Payment

Self-employed people can set their own schedule, control their workload, and have the opportunity to earn unlimited income. Although self-employment has its perks, there’s also a downside. Unlike an employee, you're responsible for finding and keeping clients. There’s always the risk of losing a profitable client and your workload can change each week, so you might deal with inconsistent income. Income fluctuations make it difficult to budget for expenses. Since income you receive can change from month-to-month, paying your mortgage on time can be a challenge. However, the following tips can ensure you never miss a payment. Maintain a Cash Reserve Since self-employment income can be fickle, you shouldn’t jump into this way of life without sufficient savings. Money experts recommend having at least a three-to-six month cash cushion. This recommendation is for everyone, but it’s especially important for those who are self-employed. Once you make the decision to start a business, don’t quit your day job prematurely. Continue to work with your employer for a few months or longer. This way, you can cover your bills, plus build a cash reserve in preparation for running your business full-time. A cash reserve provides peace of mind. If a client pays late or terminates your contract, you can use this money to pay your mortgage and other expenses. Live Beneath Your Means This is a hard concept for many people, but if you're self-employed, living below your means can ensure never missing a monthly payment. For example, if your business brings in $4,000 a month after taxes and expenses, could you live off $2,000 a month? Living off less than you earn provides a little wiggle room each month, giving you an opportunity to save. It also ensures enough cash flow to cover expenses if you were to lose a client. Have a Client Cushion It’s smart to have more clients than you need. Some self-employed people make the mistake of having just enough clients to survive each month. However, clients don’t last forever. If a client doesn’t pay an invoice or stops using your service, you might scramble to quickly replace this income. With a client cushion, you can lose a client and maintain your lifestyle while looking for a new one. Pay Mortgage within Your Grace Period Mortgage payments are due on the 1st of every month, but lenders give borrowers a 15-day grace period. If you invoice clients once a month for your services, send invoices on the first of the month and require payments by the fifth or tenth of the month. This is especially important if you need money you earned during the month to pay a mortgage due on the first of the next month. If you take advantage of your lender’s grace period, you can receive your money and pay your mortgage just in time to avoid a late fee. Self-employed people might deal with more headaches than an employee, but unlike an employee, you have more freedom. Income fluctuations can take the fun out of self-employment. However, with preparation and a cash reserve, you can make sure you have cash to cover your expenses every month.