How to Plan for Savings as a Sole Proprietor

How to Plan for Savings as a Sole Proprietor

It’s a tale that all sole-proprietors know too well: some months things are going great and the dough is rolling in. But then the next few months are an icy, cold winterland where the cheques stop coming in the mail and you have to stop RESP contributions.

Although the flexibility and feeling of achievement usually make up for it, the life of an entrepreneur and parent can be stressful and unglamorous. Not to mention making it super difficult to manage your money — especially savings.

It’s almost impossible to set monthly saving targets when you have variable income. For that reason it may be a better idea to set annual savings targets.

When you have annual savings targets it gives you more flexibility.

For example, let’s say your annual savings target is $5000. Every month, depending on what you make, you put in a portion into a high-interest savings account. Months you’re doing well you put in more, and months that are tight you put in less. At the end of the year, you decide where to deploy those funds.

Maybe you decide to contribute to your RRSP, a TFSA, an RESP or put a lump sum toward your mortgage. Or maybe things go south and you need to deploy money for the emergency and to avoid going into debt.

Here are 2 simple steps you can take to help you set and accomplish your goals:

1. Create a list of financial priorities

To figure out where you want to put the money at the end of the year you need to be clear on what you’re saving for. Do you have young kids and is saving for their education a priority for you? What about paying off your house while interest rates are low? Do you want to plan for your retirement by investing your money within a TFSA? Is having a large emergency fund going to make you feel more secure? Sit down with your partner and have a long-think and discussion about your financial priorities.

2. Automate a minimum savings amount

There’s usually a base revenue amount you can count on every month. Whether that’s $1000 or $10,000, you probably have a few steady clients. How much can you realistically save of that amount after expenses? Take that figure, which is hopefully around 12%, but even if it’s 2%, make an automated savings plan to transfer those funds into a high-interest savings account.  That way you’re guaranteed to make monthly progress toward your annual savings goal no matter what. In months that you’re doing well, add to this amount.


Shannon Lee Simmons is the founder of the New School of Finance. They offer fee-only financial planning services, and online courses like the Sole Prop school for sole-proprietors. Use promo code “mamas” to get 20% off their courses.

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