Summary: Employees working in companies have an element of income security that Small & Medium Enterprises (SMEs), freelancers, actors, and artists do not have. Given the uncertainty in income flows for the latter group, financial planning is crucial to ensure a comfortable lifestyle when income flows may be less.
There are many people who are self-employed or work as freelancers i.e. they are not employed and not paid on a monthly basis by the company. Artists in content or for design or even some SMEs fall into this category of people. These individuals face difficulty in predicting their income and sometimes in juggling multiple income streams. Building an efficient relationship with money becomes complicated. Thus, there is a need for advice from a financial expert to live life comfortably.
Many people believe that they don’t need to know about money, but actually, these independent income accruers, more than anyone else, need to know how to plan for the future and how to handle the financial peaks and valleys that they encounter in their professions.
Need for Financial Planning
Firstly, they have to acknowledge that to have a good lifestyle, they need a regular source of income which can pay off all their expenses. Having the right financial plan can help them to focus more on nurturing their talent rather than worrying about – “If I book the part, then I could maybe pay off my Visa bill, or could pay off my all the debts which I took from friends/relatives, etc.”
Conard Fowkes, Secretary of Actor’s Equity Association, New York-based Union, said of actors: “They won’t perform well while worrying about their finances. It really becomes difficult for them to not work consistently week after week. They may be very well paid for a job that lasts 10 weeks. Then they’re unemployed and haven’t put any money aside.”
The same applies to freelancers and SMEs without a regular flow of income. Thus, they must put aside a certain amount for living a comfortable lifestyle in turbulent times.
Even renowned actor, Amitabh Bachchan, once faced financial bankruptcy in his working career, in the year 2000, “When the entire world was celebrating the new century, I was celebrating my disastrous fortune. There were no films, no money, and no company.” (As stated by him in his personal blog). However, with the hosting of ‘KBC’ (Kaun Banega Crorepati), Amitabh Bachchan came back on track and since then, he has diversified his portfolio by investing in stocks, startup businesses, sports team, and other business ventures which generate regular income for him and his family.
To conclude – Why is financial planning different for someone who is not a salaried employee?
- They may not make enough income to save regularly like a corporate professional
- They put aside too much in those instruments which are either tax-deferred or are close-ended, thus, stopping them from redeeming the funds when they need the most
- They have a tendency that when they get a big break, they spend a lot and don’t save enough for a time when the income flow is less. and
- They consider planning for finances at the later stage of their life, which might lead to frustration or being saddled with debt and many others things which either directly or indirectly affects their both personal health and working habits.