Self-employed? Tips on securing your future

MANILA, Philippines – Self-employed individuals should plan for their future as early as possible, according to a financial advisor.

Dindin Santos, associate vice president at Sun Life Financial Philippines, said that most self-employed individuals in the Philippines don’t necessarily think about retirement. “For as long as they can physically do their work, they work,” he said.

Roughly 3 out of 10 working Filipinos are self-employed, according to 2013 figures from the National Statistics Office. While the Labor Code dictates 65 as the mandatory retirement age for wage and salary workers, many self-employed individuals don’t stop working at this age. They don’t receive financial packages when they grow old, too.

Are you self-employed? Here are things to do to secure your future.

1. Make sure you have a retirement plan.

“Most self-employed people don’t necessarily retire,” Santos said. For small and medium enterprises, he said the lack of a succession plan is a common reason. Business owners often find a trusted partner to help them manage the operations. “Based on the studies we’ve seen, the child is not interested,” he added. Thus, the self-employed have to keep working to keep their businesses afloat.

Those who want to stop working at a certain age need to have alternative sources of income they can collect from after retirement. Popular options are products such as life insurance and mutual funds.

2. Pay your dues.

Whether you’re a freelance artist or an online trader, you need to pay your taxes to the government. This is not only mandated by law, it’s a way to have your income documented properly.

If you’re worried your money will just go to waste, keep this in mind: proof of income comes in handy when applying for bank loans or travel visas. You will also sleep better at night, knowing that you’re doing your duty as a citizen.

3. Exercise discipline in spending.

Unlike typical employees, self-employed individuals may not receive a paycheck twice a month. If you’re a freelancer, you’re familiar with the so-called ghost months, wherein projects are scarce. The money you’re expecting may arrive simultaneously in the following months. When this happens, make sure to stick to your monthly budget. A credit card is a big help during no-income months, but use it sparingly, Dindin warned. Avoid incurring debt.

4. The self-employed get sick, too.

Even if self-employed individuals do not work long hours, they’re not immune to diseases and accidents. “One of the benefits of being employed is that the company provides a health plan,” Santos said. “As a self-employed individual, you have to make sure that you cover yourself.”

Enroll in government security systems such as SSS, Pag-IBIG, and Philhealth. Health and insurance plans from private companies are also available. A “higher” plan provides better benefits and a greater degree of protection.

5. Invest. Seek help from experts.

Santos advises self-employed individuals to augment their incomes with investments. Hire fund managers who will help you grow your money. This way, you spread your risk and create fallbacks just in case your business goes under.

“It’s like when you ask a person, ‘what is your main purpose for wanting to become successful?’ and most often than not, their answer would be to enjoy a great quality of life,” Santos said. Self-employed individuals are empowered because they have full control of their success and profits. But as your business grows, the stress level may increase as well. “You can control your own time, but you might also end up with more resources to manage and more money to lose. You sacrifice quality of life,” Santos said. – Rappler.com