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Ask the Experts: November 2018

Many people do not feel comfortable discussing budgets, finances, and money in general. However, these issues are important. Not only does having a proper budget and enough savings make it possible to comfortably live your daily life, but money and finance issues can cause serious stress.

Plus, having financial questions and not knowing the answers can lead to mistakes and financial trouble. On the other hand, talking about money and budgeting can reduce your stress and lead to better financial choices.

That’s why our team regularly answers financial questions online. If you have a question for us, ask us online on Facebook, Twitter or through our website.

The questions here have been condensed or rewritten for clarity and simplicity.

Should I put more money in my emergency fund or pay off my student loan debt?

Paying down debt is always a good idea. For many people, a large amount of student loan debt makes it difficult to move forward in their lives. Debt can make it tough to get married, buy a house, and even difficult to afford to have children.

For this reason, it’s typically a good idea to try to get rid of your student loan debt as quickly as possible.

However, an emergency fund is also crucial. Life is unpredictable, unexpected expenses come up, and financial situations can change quickly. If you don’t have any money put aside for emergencies, you could find yourself having to take on more debt to make sends meet if something unexpected happens.

So, both saving for emergencies and paying down debt are important. As for where you should put your money right now, it will depend on your particular situation. How much money do you already have saved for emergencies? It’s generally accepted that you should have three-to-six months of expenses saved in case of an emergency. If you already have close to this amount, then you may want to focus on paying off your debt. However, if you do not have much saved, then make that your priority.

Keep in mind that, while you are charged interest on your student loans, the interest rate is typically lower than what you would pay on credit card debt. So, it’s better to have enough savings put aside so that you don’t need to take on credit card debt. These debts tend to be even more difficult to pay off than student loan debt, once they get very large.

I’m thinking of starting my own freelance business and becoming self-employed for the first time. What do I need to know financially?

One of the most important things you’ll need to know about being self-employed is to save for taxes. When you work for an employer and take a salary, you’ll most likely have taxes deducted at the source. However, when you’re self-employed, this isn’t the case. You’ll need to save up enough each month so that you can afford your tax bill when the time comes. Otherwise, you could end up being charged significant penalties if you can’t pay your taxes.

The amount you should put aside for taxes will depend on how much you earn, but it’s a good guideline to put about 25% of your income aside each month for taxes.

When you’re self-employed, you may not be putting money into your government’s employment insurance either. This means that, if you end up in a period where you don’t have very much work, you’ll need to rely on your savings to make ends meet. In general, freelance workers should put more money aside for emergencies than those who have full-time employment. Your income will generally be less consistent when you are self-employed, so you will want to have additional money saved to get you through the tougher times.

It’s also a good idea to read up on what business expenses and write-offs you are entitled to. Some people assume that, when you’re a freelance worker, you can write off absolutely everything. This isn’t necessarily true, so look into it before you file your taxes. Otherwise, you could find yourself in tax trouble.

Finally, it’s critical to stay on top of your invoices and to keep good records. Not only will this help you around tax time, but it will keep your business running smoothly. Many freelance workers have trouble getting paid for their work, but you can alleviate some of these issues by being organized and staying in regular contact with your clients. Good luck!