Young and Self-Employed: If I only knew then, what I know now!

Lately I’ve been in contact with a few younger people who are self-employed, which is interesting from a financial planning perspective. It’s interesting for a few different reasons; they will most likely not be contributing to super or have any super at all, they may be pouring all of their money into their business or profession and they may be so focused on what they are doing now that they don’t take a step back and think about the future.

I know this from a firsthand perspective as I used to fall under the definition of self-employed as a dj (I’m washed up now). At the time I never thought about putting money into superannuation or starting an investment or rainy day fund.  If I would have continued on the path of been a dj and not putting money away then I know that in the future I would have been a lot worse off than most others my age.

 What does this mean?

There are a few possible implications for being young and self-employed. The first one we talk about is in regards to superannuation. Whilst the idea of super may not be appealing to most young people and may not necessarily be the best place for their money, the issue is that when they get to later on in life, they may be behind the eight ball in regards to savings for retirement. For young people, we won’t be able to access our super until we’re 60 and I’m sure most of us don’t want to work till then. There are many different options to look at when discussing investing for retirement and they don’t necessarily have to be superannuation.

When young, self-employed people run their own businesses they often put a majority of their money into the business. This could mean that they rely solely on the success of that business for their retirement or wealth creation. Nothing makes us happier than seeing clients succeed with their own businesses but it can also be a good idea to have a rainy day cash account if you need funds quickly and to also look at putting a little bit of money aside in something like a regular savings plan that can be used for a future deposit for a home, a new car or even travel.

Another aspect of been self-employed is that you don’t have the luxuries of things such as sick leave, annual leave, etc. Therefore, if you were to suffer an illness or injury where you were unable to work, this could mean the demise of the business. It is important to make sure that you have a protection plan in place to protect not only your business but also yourself financially. This can involve a mixture of your rainy day funds and some insurances, giving you a 1-2 combo to combat this potential problem.

 How can we help?

It is worthwhile to sit down with a financial planner to discuss different options you may have. At the very least after an initial meeting you will have a few ideas about what you may be able to do and some things to think about. Different options that we could discuss could include;

  • Shares
  • Managed funds
  • Investment bonds
  • Superannuation
  • Fixed Interest
  • Term Deposits
  • Index style investments
  • Cash accounts

Controlling our spending on unnecessary items in the short term, after all, will help us save for the things we want further down the way, such as a home, an early retirement and a better lifestyle. We’re here to help you along the way and sometimes play bad cop if we need to (you might not need that third pair of Yeezy’s) because we know that saving a little today will make for a better tomorrow for you.

Give us a call if you have any questions or would like to have a discussion!

Zac Masters headshot

Zac Masters
Financial Planner @ Pekada

Disclaimer: The information provided on this website is general in nature and does not constitute advice. You need to consider with your financial situation and your particular needs prior to making any strategy or products decision. Pekada will endeavour to update the website as needed. However, information can change without notice and Pekada does not guarantee the accuracy of information on the website, including information provided by third parties, at any particular time Unless otherwise specified, copyright or information provided on this website is owned by Charter Financial Planning. You may not alter or modify this information in any way, including the removal of this copyright notice.

Wealth Collective trading as Pekada (ABN 95 624 612 684), corporate authorised representative (CAR), number 1263725, is authorised to provide financial services on behalf of Communitas Wealth Pty Ltd.

The information provided on this website is general in nature and does not constitute advice. You need to consider with your financial situation and your particular needs prior to making any strategy or products decision. Pekada will endeavour to update the website as needed. However, information can change without notice and Pekada does not guarantee the accuracy of information on the website, including information provided by third parties, at any particular time Unless otherwise specified, copyright or information provided on this website is owned by Communitas. You may not alter or modify this information in any way, including the removal of this copyright notice.