Debt can affect anyone, even those who are in work. With research showing self-employed people are just as likely to have debt problems as the unemployed, Clare Greechan of financial experts Trust Deed Scotland offers some advice for sole traders with money worries.
Proper planning
You might have flung yourself into self-employed life with gusto, but without really factoring in every aspect of this new approach. This isn’t unusual – going self-employed can be a complex process and it’s often far easier just to have a stab at it, rather than getting lost in thorough research and planning. If this sounds familiar, consider a review of your forecasting – a root-and-branch reflection on your startup’s overheads and marketing costs. You should also take some time to properly research your market.
If you still feel you don’t have all the skills you need, don’t be afraid to ask for advice. There is plenty of guidance online for self-employed people, as well as many debt charities and financial advisors who’d be able to help and support you.
Safety net
Shocks to your business – losing a client, losing a supplier, office break-in – should be properly planned for. These kind of emergencies need paying for and, if you don’t have some kind of financial safety net, could plunge you into debt. As a self-employed person, you won’t be able to claim sick pay from an employer in case of emergency, so ensure you start building a financial nest egg if you don’t already have one.
Debt solutions
If you are in heavy debt, you could consider a formal debt solution to set you back on the right path. IVAs, debt repayment plans and bankruptcy are all potential options. If you’re a resident in Scotland, you could consider a Scottish trust deed – these allow you to turn your debt into manageable monthly repayments. Because you’re self-employed, having a trust deed won’t affect you in the way trust deeds can affect people in formal employment either. However, before you do anything, make sure you speak to a financial expert so you can work out what’s feasible and affordable for you.
Start budgeting
If you’re struggling to pay your bills, it’s time to budget. Create a tailored budget plan to help you pay down your business or personal debts. Work out a business budget – this should include all forms of expenditure, including travel costs and tax to your internet deal. This will allow you to properly see what’s coming in and out of your business so you can plan accordingly.
