Money Tips for the Self-Employed

How to stay organized and save for retirement when you're on your own.

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I have been self-employed for close to eight years. So I know how difficult and time consuming it can be to track all your income and expenses. Not to mention the dedication it takes to sock money away for your own retirement month after month. After all, it would be so much easier if I had an employer with a matching 401(k) program and I could automatically fund it every pay cycle.

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But despite the challenges, it's still possible to get on top of your financial life as a free agent. Here are some helpful finance tips for those that are self-employed or are strongly considering it.

Save For Retirement: A SEP IRA (Simplified Employee Pension) is a must for the self-employed. I opened up a SEP IRA seven years ago and add money to it every year. You add funds pre-tax, which lowers your tax base, you then pay tax only when you take money out. You cannot take money out until you are 59 and a half unless you want to pay the 10 percent penalty. The idea being that when you are 59 you will be in a much lower tax bracket and will pay a lot less tax on your SEP withdrawals. Your money grows tax free and you can add 25 percent of total income up to a maximum of $49,000 (as of 2010). If you are self-employed you really need to look into a SEP.

Budget, Budget, Budget: Like many self-employed workers and independent contractors, I often get paid in very irregular intervals. This makes a budget very important. There are times when I have to stretch for three or four weeks without a paycheck. By having a sound household budget in place my family can make sure we have cash flow available to pay monthly bills and the mortgage without having to dig into savings.

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Estimated Taxes & Write-Offs: By entering the world of the self-employed you are entering the world of estimated tax payments. Your income may look great but it's a bit deceiving as you haven't paid any tax yet! So make sure you are putting aside money to pay your estimated taxes every quarter. I suggest opening a savings account that is only used for tax money. Also, don't forget that your home office, and what you buy to supply it, is now a tax deduction. As is a percentage of your mortgage or rent, heating and cooling expenses, computer, business miles put on your car, to name just a few.

Get Organized: This is key. You have to be able to track all your write-offs, expenses, income, and business accounts. I highly recommend Quickbooks Pro, it is a great tool to keep you organized. It will be the best $150 you ever spent. (And you can write it off!)

Kyle James owns and operate a website called which specializes in online coupon codes and coupon alerts for over 700 online stores. He also has a blog, where he writes about frugal living, creative ways to save money, and other musings.