Put money aside to pay your taxes
Because I’m a long-time self-employed person I’m often asked what it takes to be successful as an independent consultant. Here are two pieces of advice:
Become an expert in a niche area so you can define yourself as the best go-to person for specific services.
Don’t forget to put money aside to pay taxes.
If you’re lucky enough to start receiving income from your business it’s easy to think that you can immediately start spending on nights out, vacations, and toys. I highly recommend enjoying yourself, but remember that the government has to take its share of any money you bring in. Employed people often have it easier because taxes are withheld in their paychecks, but if you’re self-employed you have to remember to pay estimated taxes quarterly.
For every dollar your earn put aside half for taxes in a separate account from your normal checking account. You can pay yourself a bonus at the end of the year if you’ve got extra money in that new account. Or better yet, set up a retirement plan and put the extra money in there. I don’t want to represent myself as a tax or financial planning expert—there are scores of online resources for that. But don’t put yourself in the position of owing a tax penalty because you didn’t pay your estimated taxes. The excuse “I forgot” has been used already.
Now focus on your niche.