You’re probably no stranger to the current cost of living crisis and the impending financial downturn — it has been a main focus of news since at least the beginning of 2022. People from all walks of life and companies up and down the UK are struggling in the face of record-breaking inflation, spiralling energy costs, and crippling fuel prices.
As a self-employed professional in hospitality or healthcare, you may be worried about how to manage your money during this tough time, but remember, this is not the first time we have been through something like this. There are some excellent techniques out there that can help you budget and optimise costs in order to soften the blow and weather the storm.
What challenges are self-employed professionals facing?
People are increasingly taking the leap into self-employment, and a survey last year revealed just how valuable the sector is to the economy, having contributed £125 billion. As a self-employed professional working in hospitality or healthcare, you enjoy freedoms in the choice and variety of the missions you carry out that many salaried workers could only dream of.
The typical trade-off for this — less job security — meant that the self-employed were some of the first and hardest hit by the COVID-19 pandemic, but that doesn’t necessarily have to mean that you will suffer more from the current cost of living crisis.
For example, businesses in our industries will struggle to stay on top of energy and supply chain price hikes, meaning they may be less inclined to invest in permanent recruitment. Instead, a recent study found that 20% of British businesses plan to rely on self-employed professionals to temporarily fill talent gaps.
So, while you may not struggle to find work in the next few months, the odds are that you will still feel the financial pinch. You need to remain competitive, though, so sometimes increasing your rate isn’t an option. Instead, here are just a few ways in which you can budget to help cope with the rising cost of living.
Go through your finances with a fine-tooth comb
Right now is the perfect time to check how watertight your bank account is. Take a long, hard look at your finances and eliminate any leakages. There will inevitably be subscriptions that you can cancel, or redundant insurance policies that you didn’t even know you were paying for.
Similarly, are you sure you are claiming for all the financial aid you are entitled to? Depending on your company structure and personal circumstances, you could be eligible for financial help or fiscal relief through Universal Credit. The best way to find this out is to use MoneyHelper, a government-backed but ultimately impartial financial advice and optimisation service that can help you cut through complex procedures and see more clearly.
Find innovative solutions to save you money
Think about all of this as an exercise in continuous improvement and innovation: are you working as efficiently as you could be? Could you use different tools to cut costs? Are there jobs that you could travel to using public transport instead of your car? Could you take the initiative and organise a ride-share scheme with neighbours to get into town or to the hospital in the morning?
If you do have to take your car, you could almost certainly benefit from using fuel price tracking apps to get the best deal on filling up the tank wherever you are in the UK.
What about your mobile phone contract? If the renewal date is approaching, now is the time to negotiate a better deal. If not, bear in mind that many operators offer the best prices to new customers, so try to shop around and see what other deals are on the market.
Keep control of your business finances
Also, if you use your phone professionally — from managing your accounts to receiving new mission offers every day on the Brigad app — don’t forget that you could potentially claim it as a business expense and save money on your next tax return. Everything from your car, uniform and protective equipment, training courses, and bank and insurance fees can be deducted from your taxable profits, depending on usage and your personal circumstancescompany structure.
Talking of taxes, a huge financial mistake a lot of new self-employed professionals make is not setting aside what they owe the taxman as they earn it. When tax deadlines seem like an eternity away, it can be very tempting to use some of that extra cash to pay for everyday expenses. Don’t!
The most sensible business advice would be to calculate how much tax, VAT, and National Insurance you owe out of each invoice payment and put it to one side. It may be frustrating to see all that money and not be able to dip into it, but doing so — even a little — will mean having to pay it back further down the line, potentially causing future hardship when deadlines loom.
Speculate to accumulate?
Paradoxically, though, sometimes spending money now can benefit your future financial situation in the long run. This is especially true for investing in upskilling or reskilling, as higher-skilled workers command higher pay.
Self-employment training is often funded by local government and public sector bodies, but with local councils struggling, too, they may be likely to cut some training programmes. This isn’t necessarily cause for concern for you, though, as you can find some excellent (free or inexpensive) online training courses to improve your industry skills or pick up new business management techniques.
In the same vein, it may seem counterintuitive to increase your costs by contracting various insurance policies. However, things like income protection, critical illness cover, and mortgage payment protection can lend an invaluable helping hand if hard times hit. It is estimated that 13% of British self-employed professionals do not have any such insurance policy, leaving them wide open to financial difficulties if anything were to go wrong.
At the very least, consider setting up an emergency fund and adding to it every month to have something to fall back on if the cost of living crisis proves even more challenging in the coming months.
Accept missions and be in charge of your financial future
Up and down the UK, thousands of people are finding that their weekly pay cheque goes a little less far than it did a few months ago. As a self-employed professional finding missions through Brigad, you have the power to choose the missions that suit you, both technically and financially. By following some of these steps, you can begin to retake control over your personal and professional finances and better budget for the cost of living crisis.