5 Money Hacks Every Self-employed Singaporean Must Know

Being an entrepreneur can be rewarding, but there are financial pitfalls you may not expect. Use these 5 money hacks to help avoid them.

Everyone loves the concept of being their own boss, but the execution is a little more complex. There are a lot of financial ups and downs, when you go the self-employed route. It pays to know them, to make your life easier. Here are five money hacks every self-employed person should know:

1. Use Annual Payments for Insurance, or Online Tools

You don’t need to pay monthly premiums for your insurance; you can also pay for the entire year upfront. And if you’re self-employed with a fluctuating income, that’s often a good idea.

The reason is simple: if a financial crisis happens, and you have two or three “dry months” when you can’t pay your premiums, your insurance will lapse. This could wipe away decades of accumulated savings, and leave you financially unprotected when you’re at your most vulnerable. It’s better to get the whole year covered while you have the money, so it’s not a worry later on.

You should consider doing the same for essential services (e.g. for subscription to specialised software that you need to do your job, or to industry specific news feeds). If for some reason you’re unable to make the monthly payments later, it would be impossible to do your job.

As an added bonus, you tend to get a discount on most services, when you pay per annum instead of per month. (This also applies to insurance; you can usually get a small discount if you opt for annual premiums.)

2. Insure Your Critical Tools

If you’re a photographer, make sure your camera, work laptop, and other work tools are fully insured. If you’re a musician, make sure your performance instruments are covered, as are any tools on your body (e.g. consider insuring your hands, if you’re a pianist).

Speak to a financial advisor on the various forms of General Insurance (GI) you can use, or specialised health insurance (if you’re a performer, and your body is your tool).

Remember that not all clients have, or will provide, the tools that you need. Not everyone who hires you to edit video will have a Mac with Final Cut Pro (they expect you to have it; that’s why they’re hiring you). If your essential tools break, and you can’t afford to replace them, it would seriously affect the range of clients you can service.

3. Learn to Use Invoice Factoring

This next hack only applies if you've registered yourself as a business.

Invoice factoring (or invoice financing) allows you to take a loan, using your invoice as the collateral. For example, say your client owes you S$15,000, and you have it all in writing. However, you will have to wait for up to 90 days for payment.

You could then use invoice factoring to borrow up a percentage of the loan (say 90 per cent, of S$13,500) for three months, at a given interest rate. While it’s true you’re losing some money from the interest, getting the money early can be crucial to your cash flow (e.g. you can’t hold off paying your mortgage for three months).

There are some other variations of this. For example, some factoring agents will straight up pay you 70 per cent of the invoice, but accept the task of collecting the full invoice from the client themselves (in effect, they buy the accounts receivable from you). While you get much less than just borrowing against the invoice, it also spares you the risk of a client who can’t pay up.

Note that invoice factoring isn’t too useful for small amounts, as the costs become prohibitive (the factoring agents may take more, if the invoice is just a few thousand dollars). Use it for large invoices, such as several thousands or more.

If you’re going to do big projects, which take a long time and involve larger sums, learn to use these services.

4. Limit Revisions to Your Work

Say you edit videos, code apps, write articles, etc. as your job. What happens if you get a fussy client, who is still insistent on changes after you’ve made several dozen?

If you code websites, for example, you may get clients who are demanding changes even four or five months after the actual project is completed. Likewise, some unethical clients will demand multiple changes to artwork on their standees or ad banners, and use all the versions (they are effectively getting you to make 10 illustrations for the price of one).

Always have a contract, and state your maximum number of revisions. Factor this into your price: the more revisions you permit, the more you should bump up your price. Otherwise, you’re going to end up losing money, as you squander hour after hour making “corrections.”

5. Have a Clear System for Raising Your Prices

Many self-employed persons have an issue with raising prices; you’re understandably worried that a high price will drive away business. So here’s a simple hack for you to get around it:

First, work out the number of hours (or number of projects) you can comfortably do per month. If a new job offers comes in, which would push these boundaries, set the price higher (and keep going higher for each subsequent project, until you can’t take any more).

If the client accepts the higher price, you’ll be fairly rewarded for working extra hard. If the client doesn’t accept the higher price, you’ll have more time on hand; you’ll be less stressed, and can lavish more attention on existing projects.

On top of that, you’ll get a clearer sense of how much people are willing to pay you (never rely on the industry standard price, as your quality of work may be higher and justify better prices).

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