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How I Plan to Payoff Debt While Self-Employed

August 21, 2015

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Since becoming self-employed, a lot of things have changed! One thing that hasn't? My debt repayment. Here's how I plan to pay off my debt while being self-employed @shoeaholicnomore

So far working from home has been like a dream. Seriously.

I wake up at about 6:45-7:00 a.m. I feel rested and ready to take on my day. I have time to workout, shower, work on my yard, do housework, make homemade meals, and still “squeeze in” about 6-8 hours of work on my business each day during the week. My weekends are more relaxed, but I still usually spend a couple hours at some point each day working.

I also get to take sporadic breaks to play with my dogs and let them out more often to use the bathroom.ย If they were English-speaking dogs I’m sure they’d chime in and say they love me working from home too. ๐Ÿ™‚

I’m loving the work-life balance I’ve had lately. I guess going from working essentially 2 full-time jobs down to working only 1 full-time-ish job. In fact, I might actually get to find my book for my book club this month. That hasn’t happened all summer so far.

The down-side of this is that I lost the income from that full-time job when I quit. ๐Ÿ™

I no longer have the security of knowing EXACTLY how much I was going to make every two weeks and EXACTLY when the money would be in my checking account.

The good thing about this is that the “unknown” factor has pushed me to work hard at seeking new jobs and I’ve had some great opportunities come my way in the last couple of weeks. Things aren’t finalized yet, but if they work out it’ll be amazing!

One thing I’ve thought a lot about is how I’m going to approach my debt now that I’m self-employed. After all, becoming debt free is still a goal of mine and I know that once I’m debt free I will be able to spend more money on fun things and feel a little less stressed about the unknown that comes with self-employment.

So here’s my plan for paying off debt while being self-employed.

I Didn’t Change My Budget

I have been budgeting for more than my minimum debt payments in my monthly budget plans for quite a while now because of the snowball I’ve built up by paying off some credit cards with small balances. I decided not to lower my target amount for debt payments each month, but to be on the safe side I’m going to change how and when I make my payments.

Pay Minimum Payments At the Beginning of the Month

My plan is to pay only the minimum payments on each of my debts at the beginning of each month. Then as the rest of the month progresses I’ll have a better idea of how much I’ll be bringing in on my mid-month invoices. If I fall short of my goal I will skip my “extra” debt payment so I don’t have to borrow from my emergency fund to cover the shortfall.

Hopefully this won’t ever happen, but the uncertainty of freelancing suggests that it could. I don’t want to reduce my debt payments which is why I didn’t lower the debt payment line in my budget plan, but I do have a cushion of about $250 just in case my income would fall short.

If you are self-employed, how do you handle debt payments? What do you think of my plan to pay off debt while self-employed?

*Part of Financially Savvy Saturdays on brokeGIRLrich, A Disease Called Debt and Shoeaholic No More*

Since becoming self-employed, a lot of things have changed! One thing that hasn't? My debt repayment. Here's how I plan to pay off my debt while being self-employed @shoeaholicnomore

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32 responses to “How I Plan to Payoff Debt While Self-Employed

  1. That sounds like a good plan. You’ve got your minimum payments covered and anything else you can pay during the month will help pay off your debt faster.

  2. That sounds like a great plan. Paying your minimum payments up front and then adding more at the end of the month is a really smart way to take care of your bills and pay down debt faster.

  3. Kayla, I am so happy for you! Debt is stifling but that doesn’t mean that people should fear entrepreneurship. Way to take a calculated “risk” and go in with a plan.

  4. I love seeing how others handle their debt and budgets and the more open you are the more it helps all the rest of us, thanks for sharing your plans and dreams. Stopping by from the Financially Savvy Saturday link party ๐Ÿ™‚

  5. This does sound like a good plan. I wasn’t completely self employed, but when we were paying off the husband’s mini debt, we paid all our bills first for the month including minimums and then anything over got thrown at the debt. My income from employment is variable. It’s challenging when you don’t know exactly how much you’ll be bringing in… Or when people will actually pay you!

  6. You have to get ahead (or have an emergency fund to start) but one thing I’ve read that freelancers should do is spend last months money this month. In other words, you don’t know how much you are going to make this month, but you do know what you made last month and if you have it in the bank, spend that much this month,and put this month’s money in the bank. Next month, base your budget on what you made this month.

    1. Yes, I would like to do that but at this point I don’t have enough of a “buffer” built up to be able to live on last month’s income.

  7. Kayla, that’s really a good plan because you are aware of the pros and cons and you have a game plan, which doable. Personally, I handle my debt with use of snowball method, which really works. I just hope I can be debt free according to my plan. Good luck Kayla.

    1. I use the snowball as well Jayson, but now that I’m self employed and have a little more uncertainty about time of payments coming in I am going to kind of play it by ear, but I still hope to pay my snowball payment each month.

  8. Paying two payments a month seems like a great approach! Way to find a responsible balance and here’s to hoping your self-employment is so successful, you manage to pay off your debts even sooner than you anticipated!

  9. Your plan sounds sensible Kayla! Being self employed does mean a variable income, however that means it can increase as well as decrease. For what it’s worth, I managed to overpay my debts much more once I was self employed working from home as I was saving money in other areas, like not having to commute to work or buy work clothes!

    1. That’s a great point Hayley! I drive a lot less now that I pretty much never leave home. I probably go out to do errands about once/week, so I am definitely saving gas (aside from a couple of trips I already had planned and budgeted for separately from my regular gas budget).

  10. Thanks Kayla. I think itโ€™s a brilliant plan that ensures that all debts are paid in full. Not changing your budget plan shows how hopeful and audacious you are in freelancing work. With respect to the second minimum payment plan, it is the bravest thing I have read lately. The plan will definitely help you achieve your financial goals.

  11. I’m lucky to have my fiance for support, including financially speaking. Worst case, he can cover all the minimum payments with his paychecks, but that’s obviously not how we want to live. I don’t want him to pay for my student loan debt, and he shouldn’t have to. And I like to eat more than just ramen noodles.
    I’m a big fan of paying in advanced for things, so I really like your plan!

    1. Thanks Amanda! I’m glad you guys have a back-up plan for in case you don’t earn enough money some months in the future. That’s great!

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