How do I manage my money and super as a business owner?

I’m a self-employed sole trader, working as a content creator. My income fluctuates every month, making it difficult to save up consistently. A lot of finance advice caters to people with steady salaries, and I’m not sure how to apply it to self-employment. I haven’t started investing, and I don’t pay myself super because I feel like I don’t make enough. How can I manage my money better as someone who is self-employed?

Self-employment is not for the faint of heart. It’s tough not knowing how much money you’ll make next month, and it’s hard being stuck between needing to pay yourself and also trying to invest spare money back into your business.

Here are some practical steps and ways to shift your perspective that can help you navigate self-employment successfully.

Being a sole trader can sometimes mean you neglect important parts of your finances.Credit: Simon Letch

1. Separate your business and personal finances. This can be difficult, especially if you feel like you don’t make a lot of money. It might feel more secure to see the money coming straight into your account like a regular salary would.

You should get into the mindset and practice of treating your business as a separate entity from yourself (even if you are operating as a sole trader, not a company).

A mistake many self-employed people make is that they have an employee mindset, not a business mindset.

It doesn’t cost extra to have a separate bank account, and this will start to give you more clarity to distinguish the business’s financials and your own. What business expenses do you have, how much do you spend on them, how much is your business making and from what sources?

You can then pay yourself what you need from your business bank account.

Now, initially, if you’re not making a lot, you might be tempted to pay yourself all the income you’re making in the business because you need that money to fund your personal expenses. But I’d recommend leaving a small amount in your business, even if it’s just $50 or $100.

Over time, you’ll build a pool of money within the business, which you can use to fund business expenses without tapping into your personal savings. It also starts to act as a buffer, in case one month your income is lower than expected.

2. Start making superannuation non-negotiable. Let’s take a step back and look at what superannuation is and why it exists.

Super is a place you can put your money to be invested on your behalf for your retirement. The money is yours and at a specific age (decided by the government) you will be able to access that money to support you later in life. Superannuation didn’t always exist. It was brought in by the government in the 1990s.

Why? Because most people will never voluntarily prepare for retirement decades in advance. Are most people in their 20s, 30s or 40s thinking about retirement? No.

Would they voluntarily put money away for something that is going to happen decades in the future, when they could use that money on something they want right now? No.

People start thinking about their retirement in their 50s and 60s, but by then it’s hard to catch up because the real magic of investing is time. The earlier you start investing, the faster your money will grow over time.

Preparation for retirement needs to happen not years but decades in advance. This is why super is mandatory for many people because too many people are at risk of reaching retirement with insufficient money to see them through it.

Since it’s not compulsory for many self-employed people, it’s something you have to choose to make a priority. In fact, start thinking of it as a tax you have to pay.

How do you do this if you aren’t making much money? Firstly, start small. It could just be 1 per cent of your income. Secondly, start charging more and put that extra money into your super.

3. Make sales and marketing a priority. A mistake many self-employed people make is that they have an employee mindset, not a business mindset.

As an employee, your job is to be good at the skill you’re being hired for. When you’re self-employed, it’s not enough to be good at the skill you’re offering. You also have to be good at selling your services.

Whether you like it or not, you are operating a business. Figuring out how to get clients on a consistent basis is the activity that will make or break your business.

So, dedicate time to learning how to market your services. Start by looking at where you currently get most of your clients from, and do more of whatever is already working.

This will help you bring in more money. Once you start making more money in the business, you’ll be able to pay yourself (step one) with more regularity and predictability.

Paridhi Jain is the founder of SkilledSmart, which helps adults learn to manage, save and invest their money through financial education courses and classes.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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