Saving for early retirement can too often be seen as an endeavour that is only for those who are in full time employment. If you work part-time, have multiple jobs, or you are self-employed, the challenge of saving enough for FIRE may seem insurmountable.
Many people in these positions don’t even consider the possibility. The problem here is a psychological one; it is assumed that the 15 percent of UK citizens who are self-employed or own their own business would not only find it more difficult to save but also that they would not want to take early retirement.
This is a collaborative post.
Accounting and taxes
If you are just beginning your self-employed journey, and in the midst of setting up a business, planning for FIRE may be at the bottom of your priorities. However, it’s important to start saving as soon as possible, and getting into good habits will stand you in good stead for the rest of your life.
Neglecting your accounts at this stage could lead to a slippery slope, and you want to be in control of every last penny you earn. Hiring an accountant, even at this early stage, will be worth the savings in the long run.
Once your turnover grows, it will also be very important to keep an eye on legislation and keep ahead of the curve, particularly with HMRC, for example with their Making Tax Digital implementations.
If you are coming from a background with a company, you might not know what you can claim on expenses as a self-employed trader. It’s well worth researching and getting on top of, as you will be able to save on your taxes each year by being meticulous with your tax returns.
Check out the government website for a full list of claimable expenses. Throughout the year, make sure to save and label all your receipts – and importantly, separate your personal and business transactions through two different bank accounts. This will make tracking your expenses much easier.
As a self-employed trader saving for FIRE, it will be more important than ever to keep a close eye on the balance of your income and expenditure, particularly as your income may fluctuate from month to month.
A final tip to this effect is to make use of the many new apps flooding the market, including money-tracking apps such as Yolt and the accounting software Quickbooks. As a free agent, you might spend most of your working days out and about; these apps will allow you to keep an eye on your finances in a portable, hassle-free manner.
It’s never too early to start saving for FIRE, and never too late, even as a self-employed business or tradesman.