I am Self Employed with Variable Income. Help me Save and Invest!

Listener's Question: Financial Management for a Self-Employed Therapist 

We recently received an important question from Elle, a self-employed therapist who also works on a 1099 basis at a group practice. Elle wants to know how to save and invest with an unpredictable income flow.

Key Insights for Financial Management in ADHD

1. Separate Business and Personal Finances
   Start by opening a business bank account and a savings account. This separation simplifies tax reporting and helps you understand your business costs better. Using accounting software for tracking receipts and invoices can also be extremely helpful in keeping your financial records organized.
2. Understand Business Structures
   Take the time to consider different business structures, such as sole proprietorship or LLC, and choose the one that best suits your needs. Each structure offers different levels of legal protection and tax benefits, so it's important to do your research or consult with a professional.
3. Budget and Expense Management
   Tracking both personal and business expenses is crucial for effective financial management. Utilize budgeting tools like Monarch or accounting software to gain clarity and streamline the budgeting process. Establishing budgets for fixed and variable expenses will help you develop a comprehensive financial plan.
4. Tax Planning
   As a self-employed individual, you'll face unique tax challenges. Set aside a portion of your income (around 25-35%) for taxes, depending on your specific circumstances. Consider paying quarterly taxes to avoid penalties and make sure to track industry-specific deductions to maximize your tax benefits.
5. Income Forecasting
   Given the unpredictable nature of self-employment income, it's crucial to understand the variables that affect your monthly income. Utilize tools like spreadsheets for income forecasting to develop a realistic financial plan and make informed decisions about managing your expenses and investments.
6. Emergency Funds and Business Investments
   Maintaining an emergency fund specifically for your business is essential. Having a financial safety net can help you navigate unexpected expenses or cope with fluctuations in your income. Additionally, as a self-employed professional, reinvesting in your business for growth and skill development can yield long-term benefits.
7. Smart Investment Strategies
   Once you have covered your expenses and established an emergency fund, it's important to consider investment strategies. Explore options like a SEP IRA or Solo 401k, which offer higher contribution limits, tax advantages, and long-term growth potential. Working with a financial planner can help you identify suitable investment opportunities.
8. Utilizing Professional Assistance
   Managing finances can be overwhelming, especially for individuals with ADHD. Working with a financial planner can streamline the process and provide expert guidance. By delegating financial tasks to a professional, you can focus on growing your business and leveraging your strengths.

For Elle, the tailored approach involves:

• Opening business accounts to separate personal and business finances.
• Diligently tracking all expenses and income using accounting software.
• Evaluating the need for an emergency fund and establishing one if necessary.
• Consider options like a SEP IRA or Solo 401k for smart investments.

Conclusion

This blog post provides a thorough exploration of financial management for individuals with ADHD, particularly those in self-employed professions like therapy. It emphasizes the importance of separating personal and business finances, efficient budgeting techniques, strategic tax planning, and the value of professional advice. By implementing these strategies and approaches, individuals can navigate their finances more effectively, paving the way for a more organized and prosperous business journey.

Remember to stay tuned for more insightful posts on ADHD Money Talk!