Avoid the Financial Trouble I got into when I started IT Contracting.
I was as pleased as punch when I got my first contract. I was 25 when I started contracting and I‘d worked out that I‘d be out of it by the time I was 30.
Then, I would be able to have as much fun as I liked, with a fancy car, a nice house, and I wasn‘t sure if I would have a yacht or a motor launch. The French Riviera might be the place to hang out after I‘d hung up my program listings.
I was, after all, earning twice as much money as I was as a permie. I was just hoping that the 4/5 years that I calculated would make me rich wouldn‘t be wasted years. So, I was hoping that 30 wasn‘t too late to still have fun.
There wouldn‘t be much point in having all that money if I was too old to enjoy myself. That was the only worry though.
I suppose that I was on about the equivalent of £1,700 a week at today‘s prices. So, I couldn‘t wait to get my first monthly pay cheque. I couldn’t see the financial trouble ahead.
I wasn‘t going to go crazy in terms of spending, although I had allowed myself to spend a little more a week than I used to. That wouldn‘t make much difference as I was now earning twice as much.
I had been told that cars were tax-deductible and that the petrol could be claimed as expenses too. So, I should get a car then.
I could get it out of the first month‘s pay. I knew that I should really put some aside each month for tax, but as I was earning so much I could just save a little bit extra in each of the other 11 months of the year.
The crazy thing was that I couldn‘t even drive. However, I felt that the important thing was to get the tax-deductible item first and THEN learn to drive.
It was a convertible car and I often got my friends to drive it around. A lot of the time it just sat outside my flat in Maida Vale though.
The car cost me the equivalent of £5,000 at today‘s prices.
I hadn‘t realised that the insurance would be so much though and that you had to pay just to park it outside your own flat.
It wasn‘t a great problem though and the second month‘s pay arrived without me spending it on any big item.
Make Your Money Work for You
The third month‘s pay arrived.
I thought that it seemed a shame that the money should just sit in the bank account waiting for the end of the year. It could be earning money for me.
If I made my money work for me then I could be out of the business before I was 30. When I was calculating when I could be out by, 4/5 years didn‘t seem that long. After 3 months in my new contract it started to seem an eternity away.
Therefore I stuck the equivalent of £7,000 (in today‘s money) in one share in the Stock Market. I based my selection on the basis that it was the cheapest share in the sector at only 8p. It therefore had further to go up I thought.
It was a recovery share. I was willing to take a bit of a gamble. I didn‘t do any analysis on it. That’s because I had a system. I didn’t expect Financial Trouble.
It didn‘t seem to move much, which was slightly annoying – perhaps half a pence up or down. I would have liked more action than that
Financial Trouble – Shock News
I still remember entering St. Paul‘s tube station having bought an Evening Standard at the entrance. I opened the paper at the financial section. It said in the headlines that my share had been suspended.
I was stunned!
I almost forgot to get off the escalator at the bottom. How could I have had such bad luck with my very first share? This wasn‘t the way it was supposed to be. I didn’t expect ths financial trouble.
All my money had gone on this damned share and a car that I couldn‘t even drive that was sucking money out of me. I couldn‘t even afford any lessons.
Between them they had even taken all of my savings from before I went contract as well.
I had spent everything and had saved nothing for tax. This was just the start of my financial trouble.
I‘ll let you know what happened next in a coming article.
Ad – Contractor Services
To see our Directory of Contractor Accountants click on IT Contractor Accountants Directory
If you do need an umbrella company you could try one of the following:-
Public Sector Umbrella Company
Or would you prefer to get expert advice about which umbrella company is right for your specific needs? If so fill in the form below and they will be in touch.
For Mortgages specially designed for contractors try Specialist Contractor Mortgages.