{"id":11126,"date":"2015-09-22T07:36:18","date_gmt":"2015-09-22T07:36:18","guid":{"rendered":"https:\/\/www.hrblock.com\/tax-center\/?p=11126"},"modified":"2020-05-01T19:19:43","modified_gmt":"2020-05-02T00:19:43","slug":"self-employed-and-in-debt","status":"publish","type":"post","link":"https:\/\/www.hrblock.com\/tax-center\/small-business\/self-employed\/self-employed-and-in-debt\/","title":{"rendered":"A 5-Step Plan for Paying Off Debt When You\u2019re Self-Employed"},"content":{"rendered":"

Ed note: <\/em><\/strong>Paying down debt and living on a budget are personal finance fundamentals. But that doesn’t mean they are easy to accomplish. Those tasks can be particularly challenging if you aren’t employed in a traditional 9-5 job. Carrie Smith has awesome tips for all the freelancers, small business owners and self-employed and in debt folks out there.<\/em><\/p>\n

The benefits of being self-employed are extremely appealing. They include freedom, flexibility and the potential for unlimited income. But one thing most people don\u2019t talk about is how much of a roller coaster it can be for your bank account and financial goals. To start your self-employment adventure, you may have to make a significant investment in your business to get started. You may have erratic income. You may have surprise expenses.<\/p>\n

What’s certain is that you have to put in the time and effort to make financial stability happen. Here\u2019s how to reverse the momentum and start aggressively paying off your debts \u2013 even without a regular paycheck.<\/p>\n

\"pay-off-debt-mountain-carrying-items\"Stop Adding to the Debt Mountain<\/h2>\n

This step is actually one of the most overlooked pieces of advice. If you want to make any progress with your debt, you have to stop adding to the balances <\/strong>and take back control of your spending.<\/p>\n

Go on a Spending Challenge<\/h2>\n

One of the most effective ways to pay off debt involves going on a short-term spending challenge. I put my business on a 60-day Cash Only challenge<\/a> where I only spent money if I had the cash in the bank account. I only used a debit card. No credit cards or loans were allowed.<\/p>\n

This challenge allowed me to evaluate what was worth spending money on and what could be cut from my budget. It basically put everything into perspective, while helping me reign in my spending.<\/p>\n

Once you complete a challenge like this, it is much easier to create a new budget that you\u2019ll actually stick to.<\/p>\n

Learn to Budget With Irregular Income<\/h2>\n

It\u2019s no secret that working with clients and running your own business is volatile for your bank account and financial goals. So if being self-employed is what you want to do, then you have to learn to budget with irregular income successfully. Download my free budget template<\/a>, or use one of the other types of budgets to create a custom plan that works for your needs.<\/p>\n

In my experience, it will likely take 2-3 months for your income and expenses to level out and work within your new spending limits.<\/p>\n

Level Out Your Income<\/h2>\n

Another way to aggressively pay down your debt is by increasing your cash flow. Aim to level out the inconsistencies of self-employment income by applying simple cash flow strategies<\/a>, like:<\/p>\n