Avoid these financial mistakes as a self employed individual

If you do decide to delegate, it’s key to spend your dollars in ways that help your business grow. To do this, people should consider focusing on the business operations and systems versus just aesthetics, Brown said. Doing this effectively often requires prioritization.

“In the beginning, people are always focused on the look,” she said. “But that’s not what truly creates the income in business.”

Not saving for retirement

Saving for retirement as an entrepreneur can easily fall to the bottom of your priority list. This is a common mistake self-employed people make, said Preston Cherry, a certified financial planner in Green Bay, Wis. Although it can be smart to reinvest in your business, it may be equally important to build an emergency fund with three to six months’ worth of expenses and invest in your retirement savings.

Cherry said self-employed people have multiple retirement savings accounts to choose from, including an IRA or a solo 401(k).

“Not only are you as a business owner saving for your retirement, you are also getting to deduct the contributions [for] tax planning as well,” Cherry said.

Contributions made to traditional solo 401(k)s and traditional SIMPLE IRAs can provide tax advantages such as lowering your taxable income and enabling your investments to grow tax-deferred. That means your tax bill is deferred until you withdraw the money in retirement.

SEP IRAs are designed for self-employed people or small businesses with few or no employees and have similar characteristics.

Spending money on courses you don’t take

As a new entrepreneur, you may want to amp up your knowledge to make your business more profitable. That could mean spending money on courses or training, which can be expensive. Although investing in yourself can be worthwhile, you won’t get a return on your investment if you don’t take the courses and apply the knowledge.

“Make sure that you are fully committed and that you are dedicated to actually doing the work and sitting down and making time before you invest in any course or class,” Brown said.

Brown also recommended doing your homework before investing in a course, especially one on social media. You can do this by looking beyond good content and ensuring the person you’re buying courses from has a proven track record of delivering results.

“For me, when I’m looking for a mentorship or I’m looking for people to train me, I’m looking at the personal success that they are having in the area that I am looking to grow in,” she said.

Not considering healthcare costs

Healthcare may be a worry for self-employed people, especially when they don’t have employer support. A health savings account is one way to make the financial load lighter because there are many tax benefits.