According to the Savings Observatory of the insurance company Caser, 92% of self-employed people do not know the savings formulas that the government has put in place for them through pension schemes. And even worse, 95% do not consider investing in it.
In a macroeconomic context where it is essential to understand the importance of the ability to save, Eva Valero, director of the Savings Observatory, affirms that “We must continue to make a huge effort to spread this type of savings, and improve the financial education of Spaniards”.
It turns out that self-employed people are the most vulnerable sector of workers in this sense, since their saving capacity is not stable and varies from month to month, due to slightly different economic prospects from those of self-employed workers. This difference is reflected, in addition to job stability, in planning strategies to manage your personal savings. The financial challenges of freelancers are therefore completely opposite.
So much so that “normal” workers benefit from certain advantages such as a fixed monthly salary, advantages in terms of contributions to pension plans, options to invest in insurance and bonuses… For their part, Self-employed workers must play a more active role in their financial planning, including saving for your retirement, emergencies and other needs. Hence the need to establish a relationship between the immediate challenges of any self-employed worker and future savings strategies, also with a view to retirement.
Unstable salary and lack of benefits reduce saving capacity
The main challenge for a self-employed person is undoubtedly the salary. If an employee knows that his monthly income is fixed, this is not the case for a self-employed person, since fluctuations every 30 days are constant in your finances, and in many cases, demand is seasonal. It is therefore the main obstacle to establishing an effective and sustainable savings strategy, but it is not the only one since it also influences additional expenses that other workers do not have.
Self-employed workers must bear a series of operating costs this can directly affect your ability to save. These include workplace expenses, i.e. renting an office, the supplies this entails and work equipment, among others. To this we must add the tax rate, which is generally higher and more complex, and variable expenses of the activity itself such as promotion and advertising or continuing education.
Another key factor is lack of financial education, although this is certainly not exclusive to the self-employed. A dilemma that arises from a very young age, where one in four Spanish students aged 15 do not reach the basic level of financial knowledge, according to the latest OECD PISA report, even in the lowest age group. older: according to data published by the Eurobarometer, Only 19% of the Spanish population has a high level of financial knowledge.
However, it is the absence of professional benefits which prevents the establishment of a roadmap for savings because, not being linked to a company, the self-employed do not benefit from professional advantages such as insurance illness, pensions, paid leave or contributions for your retirement. . This means that in addition to the absence of a fixed income, They must take responsibility for their own financial well-beingwhich includes the autonomous generation of your savings to face unforeseen events or plan for the future.
Savings Strategies for Self-Employed People
While the challenges are clear, there are several strategies self-employed people can adopt to manage their savings and improve their financial security. The “Greene Method” One of them could be a formula that deals with long-term saving through simple planning indicating that the 75% of income should be allocated to overheads and the remaining 25% to savings.
In any case, and although it can be complicated, it is essential to prepare a monthly budget of expenses and income, where variable costs must also be included. Concerning salary instability, the The monthly budget can be prepared taking into account the income of the last 12 monthswe will thus establish income much closer to the annual reality. If a budget forms the basis of any successful savings strategy, you can systematically allocate part of your income to savings. Additionally, industry experts also recommend adjusting the budget based on the months with the highest income and saving what is not spent.
A golden rule when it comes to saving for self-employed people is to separate the money intended for savings from that which will be used for daily expenses. Many self-employed people make the mistake of mixing the two funds, which can be confusing and make saving difficult. A good practice is to open a bank account exclusively for savings, where a fixed amount is transferred each month, even if the income goal has not been reached. These savings should be considered a priority and not something that depends on what is left at the end of the month.
To mitigate the effects linked to an unstable or seasonal salary, another strategy involves the creation of an emergency fund that can cover between three and six months of fixed and variable expensesso that in the event of a drop in income or an unforeseen event, such as illness, you can continue as normal without generating financial stress.
Although traditional savings are essential, self-employed people must consider investment as a tool to multiply their savings, and therefore, although not known, There are many investment tools through investment funds, cryptocurrencies or purchasing shares. In the same way, it is advisable to practice income diversification, as it can be a way to stabilize cash flow and, at the same time, generate more savings opportunities.
However, all of these planning and saving strategies should be focused on the long term and, where possible, towards retirement. Contributing to a private pension plan is essential given that self-employed workers do not have access to public system pension plans. There are different financial instruments such as private retirement plans, investment funds, or even insurance-linked savings products which can help generate capital for retirement.
Executive projects
Saving for the self-employed presents a series of challenges inherent to the way they work. However, with proper planning and the use of financial tools, it is possible to overcome these obstacles and build a solid savings base. And, although in most cases it is the self-employed person who must ensure their financial capacity, the government also offers different retirement plans.
Whether individual or group plansthe Executive offers the advantage of deducting the contributions paid from the personal income tax base. This amount is, however, limited to 5,750 euros for individual packages and 8,500 euros for business groups.
On the other hand, in our country there is the figure for simplified pension plans who have already managed to raise more than 200 million euros.
