Although there have been some major struggles with all of the transitions that many of us have had to deal with thanks to the current state of the economy, one thing that has proven to be a silver lining is that entrepreneurship is at what many experts consider to be a record-high—as a matter of fact, one that we haven’t seen at this level in close to 20 years.
This means that now is a time when many people are stepping out and living their dreams of owning their own businesses and/or working from home as contractors or freelancers. And since so many people are making their living this way, would it not make sense to explore some options for investing that hard earned money?
Are you a freelancer who is looking for a few investment tips? If so, here are five that can further help to empower you as someone who makes money, in many ways, on your own terms, and would like to see it grow as a direct result.
1. Start a Solo 401K
Did you know that there is a 401K plan that is strictly for sole proprietors? If you are someone who has no employees, you can set up a kind of 401K to where you can put away money that can grow tax-deferred. It’s called an Independent or Solo 401K and a huge benefit to this is that it will not be taxed until you withdraw it.
2. Set Up a Flexible Automation
If you’re someone who needs a bit of help when it comes to putting money aside each month for your investments, setting up a flexible automation might be the thing that you need to do. Basically, it’s a monthly transfer. In order to determine how much to transfer, look over the past six months of income that you have made and put aside a percentage that reflects the month that you made the least amount of money. That way, you won’t be investing more than you can afford during your “feast” or “famine” months.
3. Consider Investing Your Tax Payments
There is a “blessed curse” that comes with being a freelancer as it relates to the IRS. Since you are considered to be an independent contractor, you are responsible for the money that you make because none of it is taxed income. That can be a good thing, so long as you pay your taxes on a quarterly basis (especially since you can write off certain expenses by being a contractor).
Here is where the investment part comes in. The money that you do make, you can put into investing; money that people who are taxed do not have at their disposal. However, do keep in mind that if you lose money on those investments that invested cash is still owed to the IRS.
4. Maximize Your Deductions
Again, since you have to pay your own taxes, you definitely want to make sure that you don’t end up paying the IRS any more than you absolutely have to. So, make sure that you read up on all of the kinds of deductions that are applicable to you such as deducting your home office, some of your utilities, work-related travel and office supplies. If the thought of going through all of your receipts feels a bit overwhelming, companies like ShoeBoxed.com will actually organize all of your receipts for you for a pretty fair price.
5. Become a Home Owner
Real estate is definitely still a pretty unstable market, but owning a home (owning property, period) is unquestionably a wise investment especially when it comes to preparing for retirement. So, if you don’t own a home yet, make sure to start saving money so that you can within the next few years. And when you do, don’t forget to get some home insurance too. All the way around, being a home owner is a good thing to be whether you’re a freelancer or not. Both for now and the years that are to come.
About the Author
Evan Fischer is a contributing writer for Tim Sykes, the premier penny stock investment adviser. You can read a Timothy Sykes review here.