Friday, January 03, 2014

When to be IDEALISTIC or REALISTIC as a Self-employed

Being self employed, it's important to always have the ability to pay off your monthly expenses because your income does not come in the form of a pay check at the end of the month. Due to the variability of the income, I think it's easy to be either too slack or work too hard. I know what I'm talking about because I've been to both extreme ends. The hard part is to find that fine balance between working hard enough to pay off your bills, save up enough for future needs and yet utitlise the greatest benefits of being self-employed - controlling your own free time.

I think a good way is to start by knowing how much you spend annually. This includes all the fixed and variable expenses. The best way to do so is to track your expenses at least for a year, then you'll have a good idea of when those bills come in (like those from health insurance, road tax etc). I've a list of fixed and variable expenses, so I'll just list it off here.

Expenses categories:

1. Food court/coffee shop meals
2. Groceries / household items
3. Restaurants
4. Utilities
5. Personal grooming, gym
6. Entertainment
7. Clothes, shoes etc
8. Medical
9. Transport
10. Parent
11. Mobile phone/home fixed line/internet
12. Mortgage/rent
13. Insurance (whole life, H&S cash, term, accident, disability income, home mortgage etc)
14. Conservancy fees
15. Tax / property tax
16. Household repair fund
17. Gifts/ang bao
18. Charity
19. Vacation
20. For those with cars: road tax, fuel, cashcard top ups, carpark coupons, car repair/servicing/wash

For those who are really really opposed to tracking down expenses, then make a informed guess to each category. The list should be quite exhaustive since I've been using that list for a couple of years. All other categories that do not fit will go into this big lumped category called 'Others'. This works for me so far.

Being a money whore i.e. dumping passion for money

Once you've known your expenses per month, you have to be a money-whore and take whatever money is there on the table, whether you like it or not. The first tranche of money that you earn will go towards paying your monthly expenses, so no what, you'll have to get this taken care of. Only once I've taken care of the overheards, I'll worry about whether the extra jobs that I've taken is too hard, too far or too tedious for me. In other words, once my expenses per month is taken care of, only then can I afford the luxury of not being a money-whore. The rest of the jobs that I take after this basic will go towards my savings, but these are not really compulsory but rather good to have. I'll try to hit my savings target by taking enough jobs, then I'll relax and can afford to be a little more choosy. I always believe that passion is worth pursuing only when it can afford to pay the bills.

I'm of course saying this with the context of being a full time tutor. But I guess it's the same whether you're an insurance agent, or a taxi driver, or any other self-employed person. Unlike those who have a fixed salary, you can afford not to take the extra money and spend the time doing the things that really matter to you. I think this will be a good system for those who tend to work too hard and simply can't say no to extra income.

In my own situation, my monthly expenses with everything included is around 3.5k. About a third of that goes to mortgage payment. Parents and insurance take up another third, and the remaining is for personal consumption. This means that once I've taken enough jobs to cover that 3.5k, whatever additional jobs I take will go towards savings. I've mentioned that my savings target should be around 30-40k, so that means I'll have to try to hit a income range of 6 to 7k average. Well, not saying that I will hit it in 2014, but that's the target in sight, and I'll do my best to achieve it. If I do hit it, I've have another at least another 12k to do partial capital redemption for hdb, another 12k to do my own retirement fund and the rest for maybe a short vacation and play fund for gadgets.

Good luck to me and for everyone in the year 2014!


Singapore Man of Leisure said...


This post reminded me of a conversation I had with a taxi-driver.

His goal is to earn back the rental of the day by working hard the first half of the day.

Once hit, he can relax a bit.

On good days, he will reward himself with longer breaks or take an early day off.

On bad days, he drives longer hours in an attempt to close the deficit.

Interesting how freelance income earners' thinking differ from regular wage earners.

la papillion said...


That'll be exactly what I'll do if I'm a taxi-driver :) You must know when to relax and when to work mah, haha!

I think for regular wage earners, they are paid the same no matter how long they work, so they should be thinking hard how to work lesser without being too obvious, LOL!

EY said...

Hi LP,

Good luck to you! Jia you jia you! :D

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