I recently resigned to set up my own small business. I would like to know what freelance operators should do to make their financial plan suitable for a stable income.

Is it possible to have the same financial security and stability as employees?

I can earn about 40,000 baht per month, but it is not steady yet.

Some months I can make as much as 60,000 baht but others I make only 20,000 baht. That makes me feel insecure.

—Roj

Answered by ... Attaporn Promkaewngam, CFP

I would suggest you do as follows:

You have to go through your family’s expenses, checking thoroughly for debts. After that, you should make a list of expenses and assets. If debts are 50% more than assets, that is a risk.

You would have to speed up paying your debts to make sure they are down to a manageable level.

You have to manage cash flow and liquidity as best as you can. The key to financial planning and stability for the self-employed is cash flow.

Because of the usually slow kick-off of a freelance job and the huge load of investment, you should have a cash flow to at least cover expenses without earning for six months. Good cash flow tells whether you can operate your business through any situation until you grow to a point of security.

Do not invest in fixed assets during the early period if it is not really essential. You may turn your home into an office but if you need a place for meetings or negotiations, you should make an appointment at a hotel or restaurant because a home office doesn’t look professional.

A simple rule that you must strictly follow is to spend less than your earnings, but it might be difficult to do. If you have money left after cost deductions, you will have a profit left for expanding your business.

Study the tax base. You have to know which tax category your career or job falls into because the tax authority can charge different rates. But freelancers are taxed at a lower rate than employees because they can claim more tax deductions.

You should buy life and health insurance policies to cover unexpected expenses for your family, even though these policies are not a savings type. You can choose a policy with a low premium but high coverage. If you can afford it, you can buy a whole life assurance policy, which would suit your freelancing job.

In case of emergency, you might have to sell some non-performing assets to maintain your core business.

All in all, you have to create a portfolio that seeks a revenue stream from four sources — profit from your business, dividends from investment, interest from savings and rental income — no matter what kind of job you do.

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The Thai Financial Planners Association is the certified financial planner (CFP) trademark licensing authority in Thailand. It is a self-regulated, non-profit group of financial advisers and experts from various organisations set up to give advice to investors. Questions can be submitted through wealthcare@bangkokpost.co.th or the TFPA webboard, www.tfpa.or.th