This is a collaborative post: One of the biggest hurdles aspiring freelancers face is financial insecurity. While freelancing has the power to give you a stable income, you need to manage your money well. This is sometimes easier said than done, but staying on top of your cash can be simple as long as you stay organised.
Whether you’ve just taken your first steps into the world of freelancing or have been doing it for a while now, these financial tips can help you to make sense of your earnings.
Use Accounting Software
If you’ve taken money matters into your own hands and don’t have an accountant, you might want to invest in some accounting software for freelancers. This can help you keep your records up-to-date, accurately calculate your tax, and send invoices to your clients. Many freelancers try to keep their financial records in a simple spreadsheet. While this might work for a few weeks or months, once work starts to pick up, you’ll struggle to effectively manage a larger volume of transactions. Why put yourself through manual tasks when software can take care of it for you?
Keep Taxes in Mind
A big mistake freelancers make, especially in their first year of working, is not factoring taxes into their monthly earnings. While you might keep records of all the money you make, sitting down at tax time to calculate how much you owe can be an easy way of landing yourself in debt. Make sure you’re calculating your taxes as you go so you can set aside the money you know isn’t yours to spend.
Have Savings
Freelancing can be unpredictable at the best of times. Just because you’re having a really profitable month doesn’t mean the next will be the same. You might go through periods where you don’t have a lot of work, so you’ll need to have savings to carry you through to your next client.
Separate Personal and Business Spending
The easiest way to keep cash separate is by setting up different bank accounts for your freelance work and your personal funds. This will help when it comes to filing your taxes, as you’ll be able to clearly see what income and expenses were related to work. It’s difficult to pick apart business spending from your food shopping and bills if they all appear on the statement, so you’ll be saving yourself a lot of time in the long run.
Don’t Forget your Pension
When working for yourself you won’t have the luxury of your employer paying into a workplace pension for you. This means you must set up a pension plan for yourself or risk being caught short later in life. It’s something that many people don’t think about until it’s too late, but making monthly payments early on in your career can help you feel more comfortable as you get older.
Know your Worth
There are some clients who will try to pay you less than your asking price. If business is slow, you might be tempted to take them up on their offer. But you should always stick to the price you’ve decided your services are worth and never undersell yourself.