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3 Methods To Invest as a Self-Employed

As we all think about investing as a way to keep ourselves financially afloat, there is one group of people that the whole idea of trading and investing may seem more of a risk than normal. Self-employed people, who have to run their own business, trade as themselves, and essentially live a feast or famine lifestyle, could find themselves looking to invest or start trading but fall at the first hurdle because they do not have enough money or they are not able to put up with the risk. 

With approximately 15 million Americans being self-employed and 30% of them not saving for retirement, it's important to learn how investing and trading become a part of how you do business. Let's show you what you may need to consider in order to incorporate this into your self-employed life. 

Understanding Your Cash Flow Situation

Cash flow is one of those things that is part of Business 101. Many self-employed people do not necessarily find themselves prioritizing cash flow in the right ways. In order to make sure you have satisfactory cash flow, it's not just about ensuring your business stays afloat but about making sure that you stay afloat as well. 


Ensuring that you can maintain a solid cash flow is about how you conduct business. For example, if you have more options for your customers to provide payment, this means you will not be chasing them up constantly when your back is against the wall in a financial sense. There are many ways you can do this, such as setting up a card on file transaction, where a customer has a card on file, so it makes for swift and easy payments. You can set up card on file transactions here, but you must remember that cash flow is also about being in control of every single penny. This is a very difficult thing for many self-employed people to address but when you know exactly how much money comes in and out of your account at any given time, you know how much you will have leftover, which you can then siphon off into an investment. 

Know Your Investing Options

There are many different options for self-employed people. Because there's the essential need to save for retirement as far as investing is concerned, there are a number of options that you can take advantage of right now:


  • Traditional or Roth IRA. This can help you to contribute up to $6,000 every year and with both options, you can avoid paying taxes on them. 

  • Simplified Employee Pension IRA. This is a very popular IRA among small business owners because you can put up to 25% of your net earnings away every year. If you've had a good year you are able to contribute more. 

  • Individual 401(k). If you are self-employed and you have no employees apart from your spouse you can put up to $20,500 away every year, and as you are the boss you can also contribute an additional percentage of your net income. However, you cannot contribute more than your self-employment income. 


Learning the Art of Day Trading

This is another approach that can be beneficial because of the lower risk associated with trading and investing. Learning how to day trade is a very invaluable skill because you are able to invest what little you have into a stock or option while also being able to see the fruit of your labors by the end of that trading day. 


While many seasoned investors will tell you that this is not the best approach, as far as self-employed people are concerned, this can be a very useful tactic because it allows you to keep track of your finances on a very short-term basis. Because you may find that your income fluctuates according to the success of your ability to do business, day trading can give you a little boost at the end of a certain day. But it's important to remember that when you are investing in stocks or trading that you've got to get into that mindset that you could lose that money. 


Therefore, you should only invest what you are willing to part with. It's such an old lesson, but so many people let their emotions get in the way. Hopefully, some of these options can help you to keep yourself afloat during difficult times. It's not easy being self-employed but if you are looking for a way to take the edge off, these can be some useful starting points.

This is a contributed post.


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