Posts Tagged ‘Debt Management’
Self-Employed and Managing Debt
Tips for Success
Who doesn’t want to be their own boss these days? You set your own hours, make your own business decisions, and best of all, you don’t have to answer to a nagging, demanding manager! While there are numerous benefits to self-employment, there are also downsides, especially when you are struggling with a pile of credit card bills and other forms of bad debt.
The Challenges
A number of challenges can arise when you are self-employed and bogged down with debt. For one, there are work shortages that occur during certain seasons, and a paycheck is never guaranteed, so you are constantly at risk of compromising your financial wellbeing. Additionally, you soon learn that there are costly business expenses that come with owning and operating a successful home business. Since you’re not covered under an employer’s insurance plan, you incur further personal expenses for health, dental, and life insurance coverage. The combination of a lack of consistent income and high expenses can be a formula for disaster for the average self-employed individual who also has a high balance of debt to pay off.
Being self-employed during a time when work dries up can feel more like unemployment. If you find yourself in this situation, you may already be at the point where you are pulling your hair out in frustration. But if you are diligent, you can navigate your way through these challenges without losing your hairline.
So What To Do?
Here are three tips for managing debt when you work for yourself.
1) Start Pulling the Purse Strings, Even During Good Times. You have just been awarded a huge contract that should keep you financially solvent for months to come. Now, after a drought we all know how tempting it is to go out and purchase a brand new television, car accessories, or a new wardrobe. It may sound trite, but when you are lugging a load of debt around with you, it’s much wiser to keep that extra cash in your possession; the retailers can wait! People who have regular jobs know exactly how much they are being paid and on what day, and even have the option to set up automatic debt payments from their paychecks, so they can sometimes splurge knowing that they’ll cover themselves on a future payday. As an entrepreneur you do not have these luxuries, so that is all the more reason be frugal with your spending. During a tough spell you will be able to continue your debt payments seamlessly.
2) Work Closely With Your Creditors. When you hit a rough spot, the worst thing you can do is start ignoring your responsibilities to your creditors. They are more willing to work with you when you keep the line of communication open. Think you might be late one month? Call up your creditor and tell them in advance. Let them know that you are self-employed and may have some challenges in the near future. They may even have some type of payment relief option, such as a payment holiday, or they may be able to move your payment due date if you have a clean payment history. If you have many different creditors, you may want to consider debt relief programs with qualified debt consolidation companies, where all of your debts will be combined and paid from one account. This way, you will reduce the number of calls you need to make each month to one. With a credit card debt settlement plan, your total debt can also be reduced by up to 50%.
3) Double Up Debt Payments During Good Work Seasons. When you have high debt balances, your main goal should be paying it down as quickly as possible. So if you are in a good work season that leaves you with extra income, you might want to use it towards your plan to pay off debt. This way, when you come to a time during the year when your self-employment income is not flowing as easily, you can resume minimum payments if necessary, knowing that you have made those additional debt payments earlier in the year. Continue that cycle every year until your business income becomes more consistent and reliable. Remember: pay off your highest interest rate credit cards first.
Discipline Got You This Far…
The biggest take away here is that you must have discipline to weather a financial storm when you work for yourself. This shouldn’t be a problem; if you’ve made it this far as a successfully self-employed individual, surely you’ll be able to self-regulate yourself through challenging times that may threaten your plans for debt reduction. If you follow the three tips above—be thrifty, even in good seasons, keep your credit card companies on speed dial, consolidate your credit card bills into one debt settlement account with a reputable online debt consolidation company like NetDebt.com, and put any extra income you have towards doubling up on debt payments in good financial times—you should be able to make a substantial dent in your debt, even when your self-employment income is erratic.
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