Aflac: 5 Financial Tips for Self-Employed Individuals
NEW YORK CITY, NY /ACCESS Newswire / July 7, 2025 /Self-employment can bring unique financial challenges, such as unpredictable income, business expenses, and, in some cases, a larger tax burden as well. Despite these challenges, though, the freedom and flexibility that self-employment offers make it an appealing alternative to traditional employment for many.
By implementing a few key strategies and preparing in advance, navigating the financial landscape as a self-employed individual can become much easier. This article will cover strategies that the self-employed will want to consider.
1. Save in an emergency fund
Emergency funds are arguably more critical for self-employed individuals. They provide a financial cushion to help cover unexpected expenses, such as car repairs or a loss of business income.
The general recommendation is to save three to six months of living expenses. However, self-employed people should aim for the higher end of that range, or even more, given the uncertainty of income. A larger emergency fund can bring added peace of mind and help self-employed individuals to survive slow periods.
2. Save extra for and pay quarterly taxes
Taxes are typically more complex for the self-employed.
Since self-employed individuals don 't have an employer to withhold taxes on their behalf, they must estimate their total taxes owed each year and divide that amount into quarterly payments. Failing to pay quarterly taxes could result in penalties, even if they make up the payments later.
To account for these costs, it may be wise to save these funds in a separate account. Opting for a high-yield savings account could allow tax savings to earn interest while keeping them separate from other expenses.
Unlike salaried employees, who share the burden of FICA taxes (Social Security and Medicare) with their employer, self-employed individuals must pay both the employer and employee portions. This self-employment tax is separate from income tax but is paid together. While the employer portion of self-employment taxes is generally deductible, it 's essential to set aside more for quarterly taxes to account for this extra tax amount.
3. Open a retirement account
Self-employed individuals don 't have access to employer-sponsored retirement accounts, but they can open their own tax-advantaged retirement accounts at financial institutions such as banks and investment brokerages.
Several options are available:
Simplified Employee Pension (SEP) IRA: Offers tax-deductible contributions, relatively high contribution limits, a wide investment choice, and simple setup/management. It 's suitable for self-employed individuals with few or no employees.
Solo 401(k): More complex to set up and maintain, available only if one has no employees (although one can hire their spouse). It offers high contribution limits and could be a good option for family businesses run by a married couple.
Savings Incentive Match Plan for Employees (SIMPLE) IRA: Designed for self-employed business owners with employees. It allows employee contributions via salary deferral, and the owner must either match up to 3% of the employee 's salary or make 2% fixed contributions. However, these plans have lower contribution limits than some other plans and could be best suited for those expanding beyond a sole proprietorship.
In addition to these plans, consider a Traditional or Roth IRA for extra savings potential:
Traditional IRA: Contributions are made with pre-tax income, and retirement withdrawals are typically taxed as ordinary income.
Roth IRA: Contributions are made with after-tax income, and qualifying retirement withdrawals are typically tax-free.
4. Explore insurance options
Without an employer-sponsored benefits package, self-employed individuals need to explore various insurance policies.
Insurance tends to cost more without employer sponsorship, so shopping around is crucial.
Consider the following insurance types:
Health Insurance: This will cost more than employer-sponsored plans, but premiums may be deductible as a business expense.
Supplemental Policies: Look into dental, vision, disability, and critical illness insurance to help cover other aspects of health.
Life insurance needs may also be more complex for self-employed individuals. For example, if someone 's primary financial concern is covering a large debt like a mortgage, a decreasing term insurance policy could be a good option to consider. This is a term life policy with a premium that shrinks over time to reflect a decrease in the beneficiary 's financial support needs.
5. Invest in the business
Being self-employed means running a business. Investing in the business can be an excellent way to grow and stabilize revenue.
For example, a self-employed marketing professional might invest in a course to learn new skills, allowing them to expand their client offerings and potentially charge higher rates.
Networking and upskilling aren 't the only worthwhile investments. One could also consider hiring virtual assistants or other contractors to handle non-operational tasks, giving them more time to focus on revenue-generating activities.
Regardless of the investment, it 's crucial to analyze the costs and potential returns to make the best choice.
The bottom line
Self-employment 's freedom and flexibility come with the tradeoff of additional financial uncertainty.
By growing their emergency fund, saving more for taxes, opening self-employed retirement accounts, shopping for good insurance policies, and investing in their business, independent workers can help to reduce this uncertainty.
Content within this article is provided for general informational purposes and is not provided as tax, legal, health, or financial advice for any person or for any specific situation. Employers, employees, and other individuals should contact their own advisers about their situations. For complete details, including availability and costs of Aflac insurance, please contact your local Aflac agent.
Coverage may not be available in all states, including but not limited to DE, ID, NJ, NM, NY or VA. Benefits/premium rates may vary based on state and plan levels. Optional riders may be available at an additional cost. Policies and riders may also contain a waiting period. Refer to the exact policy and rider forms for benefit details, definitions, limitations and exclusions.
Aflac insurance coverage is underwritten by American Family Life Assurance Company of Columbus. In New York, coverage underwritten by American Family Life Assurance Company of New York.
Aflac | WWHQ | 1932 Wynnton Road | Columbus, Ga 31999
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CONTACT:
Senior PR & Corporate Communications
Contact: Angie Blackmar, 706-392-2097 or ABlackmar2@aflac.com
SOURCE:Aflac
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