5 Steps to Setting Financial Goals as an Independent Contractor

You have the skills that make you in demand in your industry, but you don’t want to be tied down as an employee. Instead of working for a weekly paycheck, you can choose to offer your services as an independent contractor.

In that role, you get the benefits of being your own boss. You can set your schedule and rates, keeping your client’s needs in mind and ensuring you meet them. For instance, in a job like a self-employed UPS driver, there are packages that must be delivered within a certain timeframe. But you get to pick and choose which days you work.

However, along with the perks of self-employment come the behind-the-scenes responsibilities. There are no paid sick or vacation days, company-covered insurance benefits, and automatic retirement socked away for you. It’s your responsibility to set your financial goals and make them happen.

While it’s challenging, especially as you’re starting out as an independent contractor, creating a secure financial future is possible. Follow these five steps, and you’ll have a nest egg and retirement waiting when you’re ready to put those working days behind you.

Step One: Stop Accruing Debt

You can’t do anything about your past financial choices. But you can make the conscious choice to avoid putting yourself further into debt.

Follow the advice of financial experts like Dave Ramsey, and don’t buy anything unless you can pay cash for it. You’ll be surprised at how quickly you’re able to follow this advice when you don’t have as many monthly minimum payments to juggle. The money you make is yours to do as you please instead of giving it to creditors.

Step Two: Start Paying Off Existing Debt

Now, it’s time to get real with the debt you have. How many credit cards do you have with balances on them that you’re paying monthly? Do you know what the interest rates for those cards are? 

Make a spreadsheet of your debts. Include your current balance, the interest rate, the date due, and minimum payments. Then, adjust the columns to show you your creditors by either interest rate (highest to lowest) or balance due (lowest to highest). 

Begin paying extra towards the top debt every month until it’s gone. Then, use those funds to start paying off the next debt in the column, and so on, until all your debt is paid off.

Step Three: Build Your Savings Account

Many people get confused as to whether they’re supposed to follow the traditional ‘three months of expenses in your savings account’ rule or pay off debt first. Mathematically, you’re going to get your financial health in order and build savings faster when you don’t have debt.

Think about it. The average savings account nets you an annual interest rate of .33%. The average credit card charges you 21% per year. 

Say you have $1,000 to put toward your finances. If you pay off a $1,000 credit card, you’ll save $210 in interest fees that year. But if you leave it in savings for 12 months, you’ll make $3.36 off of those funds.

You’re costing yourself hundreds of dollars by putting your cash into savings while you still have interest-accruing debt. Pay off anything you owe that charges interest before you build your savings account, then start putting those monthly payments there. 

When you have 3-6 months of expenses covered in savings — where the money is easily accessible in an emergency — then you can switch to retirement funds, like CDs, IRAs, and 401(k) plans.

Step Four: Pay Taxes Quarterly

If you were still an employee, you’d automatically have taxes removed from your check before you received your wages. Treat each payment the same way and set aside 25-30% for taxes

Independent contractors are required to pay estimated taxes quarterly. These are due on the 15th of four months: April, June, September, and January. If you don’t pay timely, you may be penalized.

Many self-employed individuals hire an accountant to help them with this step because the money they give the expert pays for itself. You’ll learn how to record mileage, save receipts, and find other ways to minimize how much you owe using the deductions you qualify for.

Step Five: Invest in Insurance Policies

Without your employer’s insurance plans, getting sick can be costly. Luckily, as an independent contractor, you have options for coverage that won’t cost you an arm and a leg.

Sign up to join gig worker platforms and get to know what’s out there for small business owners. You’ll be amazed at the discounted services you have access to because you’re self-employed.

Look for health insurance coverage, even if it has a high deductible, and term life insurance policies that are cheaper than whole-life coverage. You can also find general and professional liability policies designed for independent contractors.


Financial stability is a goal most of us have, but we struggle to meet our definition of this target. It’s even more challenging as an independent contractor because it’s up to you to set aside the funds to make your financial goals happen. 

Follow these five steps, and you’ll be on target for a fiscally successful future as a self-employed business owner.

Related Articles

Leave a Reply

Back to top button