Taxes, savings, and retirement: Tips for self-employed and variable income workers
In the following article, our experts offer personal finance advice tailored to those with variable income, such as self-employed, seasonal, and commission-based workers.
If you're a self-employed, seasonal, or commission-based worker, you know that a fluctuating income requires strict money management.
Variable income workers
Are you self-employed? To build your business and grow a client base, it's important to be consistent in your daily tasks. You also need to ensure that you're offering a quality service or product. Plus, as an entrepreneur, you're likely juggling a multitude of responsibilities: administration, logistics, communications, and more.
More of a seasonal worker? In this case, a few months of full-time work must cover your expenses for the entire year. Government assistance can give you a boost during the off-season, but if you want to save up for projects or retirement, it's best to ensure that your personal finances are well managed.
Are you a commission-based worker? While you're paid a base salary, it can be difficult to plan for the long term when your total compensation fluctuates from month to month, or when you're expecting a large sum at the end of the year.
Despite these caveats, there are undeniable advantages to having a variable income. For instance, you have the freedom to set your own hours, choose the projects that interest you, and enjoy several months of vacation every year. Plus, you can potentially increase your income each month. You just need to plan accordingly!
By developing good financial habits, you'll be better able to mitigate slow periods, carry out personal and professional projects you care about, and make the most of your retirement when the time comes.
Build a financial cushion with automatic savings
The first step toward automated savings is to take a good look at your income and expenses. Then, you can determine how much you're able to put aside each week or month. By automating your savings, you'll adopt a healthy financial habit that makes saving a no-thought process! What's more, if you choose to contribute to an RRSP+ with the Fonds through automatic savings, you get an additional 30 percent in tax savings.[1]
Self-employed workers
Vacation, benefits, and retirement: Don't treat yourself like a salaried worker
In general, your work life is different from a salaried worker's. That's why you need to plan around your specific professional and financial situation. Keep in mind, for example, that your income can fluctuate, your holidays and vacations are unpaid, you don't have an employer who can contribute to your retirement savings, and you have to pay into the Québec Pension Plan yourself.
As a self-employed worker, it's important to take stock of your financial responsibilities and establish good saving habits as soon as possible so you can reap the benefits in the short and long term. Consider making a budget, tracking your finances (income and expenses), and saving regularly for the future.
Think taxes and savings all year long
To become self-employed, you need a plan and a vision. You also need to know how to manage your finances! But where should you start? Is there a way to pay yourself a salary and save for retirement without neglecting your business? What about insurance? How can you pay your fair share of taxes but not a penny more? You may be overwhelmed with questions, but as you find the answers, you'll slowly learn how to get the most out of your career and finances. Don't hesitate to consult a personal finance specialist for advice.
In the end, having a variable income has all kinds of benefits, so don't let a few disadvantages discourage you from pursuing your dream job! By keeping track of your finances and planning your savings and retirement, you'll avoid a lot of unnecessary stress. Being scrupulous is well worth it when it leads to a fulfilling personal and professional life! Do you have a variable income? Check out our tips on how to better manage your personal and professional finances.
How to save on a fluctating income
Here's how to put money aside regularly when your income changes from month to month.
Taxes and the self-employed worker: avoid these 5 pitfalls and save money
For the self-employed worker, taxes are a significant burden. To make dealing with them easier and to maximize your retirement savings, here are 5 pitfalls to avoid.
4 questions to ask yourself before becoming self-employed
Do you want to become self-employed? Ask yourself a few questions first before making this decision.
How to save for retirement if you're self-employed
Save early, manage your investment and RRQ contribution, find out how to plan for retirement as a self-employed.
Self-employed vs. salaried: 5 things to keep in mind when it comes to retirement planning
Between developing your business and maintaining your work-life balance, retirement savings are rarely first on a self-employed worker's agenda. Just the same, it's never too late to start saving, especially when you're your own boss!
Tipped employees: 3 key ways to save more and pay less tax
When you work in the service industry, tips comprise a large part of your income, which makes for an unpredictable tax bill. Fortunately, there are a number of simple strategies you can use to lighten your tax load.
