It is important for everyone to have an emergency fund account. It is recommended to have a separate savings account that you don’t see/use regularly. By doing so, you can ensure that your lifestyle will not be majorly impacted by unplanned events. When planning for our clients’ financial future, we generally build an emergency fund for about 6-9 months of their expenses. The reason why this is very important for self-employed individuals is because their income could vary from month to month. There might be months that their income is lower than their expenses.
When you are an employee, your employer will withhold appropriate taxes for you on every paycheck. On the other hand, if you are self-employed, your paychecks would not include taxes. It is beneficial to have separate high-interest savings account for your taxes. Since your taxes will be payable next year, this money should not be invested. Generally, you should put aside 30-35% of your pay check but that number will ultimately depend on your average income.
If you are self-employed, there are certain expenses that could be used to reduce your tax burden. These expenses should be related to your business. Some of the expenses that you are allowed to claim are:
· Advertising expenses
· Office Supplies
· Vehicle expenses
· Meals
· Home Office Expenses
· Utility bills for home office
· Legal Fees
A key point you need to make sure is that all of the above need to be for business reasons and not personal.
For a self-employed individual, it is important to have other investments apart from your business itself. That being said, your business will definitely be one of the biggest investments you own. Any surplus in the business that isn’t required for the operation of the business, should be diversified into other avenues such as stocks, real estate, Mutual Funds, or ETFs.
When it comes to corporations, managing investments and other finances aren’t quite straightforward. It is highly recommended to have experts like Accountants, Financial Advisors, and Lawyers that you work with.
- Jai Gandhi, Licensed Assistant
Jai Gandhi is a Licensed Assistant at Endeavour Wealth Management with iA Private Wealth, an award-winning office as recognized by the Carson Group. Endeavour Wealth Management provides comprehensive wealth management planning for business owners, professionals and individual families.
This information has been prepared by Jai Gandhi who is a Licensed Assistant for iA Private Wealth and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on ananalys is and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained here in may not apply to all types of investors. The Investment Advisor can open accounts only in the provinces in which they are registered.
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