When you freelance or work for yourself, you can experience true freedom in your career, becoming your own boss and making all of the decisions. It’s a great feeling, and it’s no surprise that more and more people are embracing the freelance way of working.
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As with most careers, freelancing does have its downsides. The uncertainty over finding work, being responsible for your own taxes and working by yourself the majority of the time can all have an impact on your success. Money management is perhaps one of the biggest concerns for a freelancer and can be a reason why some return to the corporate world within months. However, with the right approach and some excellent advice behind you, you can take control of your freelance finances and enjoy your success.
Improve your financial situation with this simple guide to managing your money as a freelancer.
Get started with a separate business account
Having a separate business account should be one of the first things you should do when you go freelance. Having a separate account for all of your earnings will make it easier to manage your business expenses, tax, and other outgoings. If you plan on hiring an accountant, this will also make it easier for them to understand what’s going on with your money.
It also doesn’t hurt to open another account to help you build up your savings. With a personal checking account, your business account and a savings account, you’ll find it much easier to see where your money is and be able to manage your money more effectively.
Set up a rainy day fund
Businesses can be unpredictable, something that’s even truer when you’re freelancing. Some months, you could be inundated with work, while other months might just be that little bit quieter. Therefore, it doesn’t hurt to set up an emergency fund to cover you during the times when your income is lower, or you’re faced with an emergency that affects your home or business.
Rainy day funds can be useful when dealing with repairs and medical costs and unexpected travel. You might think that some of these events are unlikely, but would you be able to afford Walkup Law fire attorneys if your property was to suffer damage in a wildfire? It’s not worth the risk of finding out.
Plan for your taxes
When you work as a freelancer, you become responsible for your own taxes. This can be daunting, but if you cover yourself off from the beginning, it should be much more manageable. Use a tax calculator tool to help you work out how much money you should set aside each month. If you’re able to make reasonable projections about your income, this will help you figure it out. It makes sense to pay more tax than too little, and it could even leave you with a nice sum leftover if you’ve saved too much tax – serving as a nice bonus for yourself.
Treat yourself like an employee
To help you manage your finances better on a monthly basis, start treating yourself as an employee. By paying yourself a salary into your personal account, you’ll have a much deeper understanding of what you’ve got to spend and ensures that all of your business expenses are covered off separately. Treating yourself like an employee is also something you can do to help your work schedule, with a daily routine helping to normalize your work pattern and boost your productivity.
Create a budget
Be sensible about your salary by creating a budget for yourself. This can help you to get a clear picture of your outgoings and will allow you to adjust your spending based on how much you’ve earned this month. A budget is a sensible way to manage your money and can help ensure that all of your main bills and expenses are covered.
Insurance is something we all need for different reasons. While it will cost you money, it’s worth it for the long-term security. Consider getting medical insurance, income protection insurance as well as standard home and car insurance to make sure you’re covered against the unpredictable parts of life. Search for the best deals with Compare.com to save money on your premiums.
Getting to grips with your money is one of the toughest parts of being a freelancer, but things will settle once you get into the swing of it. Before you know it, you’ll be celebrating three years of working for yourself, which will be an amazing achievement. Get your freelance career off to a great start by learning to manage your money.