If current trends hold steady, at least 50% of the population in the United States will be freelancing in ten years. While many do freelance work for a part-time job or side hustle, many take control of their career and work for themselves full-time.
There are many upsides to working as a freelancer, but when it comes to finances, many people struggle and are forced to learn as they go. Something that can cause costly mistakes.
Looking for information to avoid common money mistakes as you work for yourself? Keep reading for five finance tips every freelancer should definitely know!
1. Have a Separate Business Account
When you essentially are your own boss, it can be tempting to just use whatever personal checking/savings account you already have for your business. Whatever you do, DON’T DO THIS.
Finances are confusing enough. You do not want to spend time sifting through your bank statements to figure out personal versus business transactions.
This will also allow you to more easily write off purchases come tax time with less scrutiny from the IRS.
2. Don’t Forget about Taxes
As a traditional employee, you don’t really need to think about taxes beyond hating them being so high. It is an entirely different world when you freelance.
Because you are self-employed, you will need to pay estimated quarterly taxes in addition to filing your annual income return.
If you are worried about keeping track of things, seek out the help of software like Intuit Quickbooks. There is also simple software to create a paystub if you ever need to outsource some of your work to another independent contractor.
3. Key Finance Tips: Save up an Emergency Fund
Nobody likes to think about struggling financially. But if the time does come where clients are sparse, you will thank yourself for having an emergency fund.
General consensus suggests having around six months of expenses saved up to cover everything. Having this safety cushion means you won’t have to take a job you hate if you become desperate for work.
4. Manage Your Time
Freelancing requires a strong work ethic and stellar time management skills. Nobody will be over your shoulder assigning you tasks and editing your work.
It’s all up to you. If you find yourself easily distracted, search online for apps to keep time for you. Setting up a schedule and routine that works for you is also important.
If you find your at-home office space is lacking, check out these simple DIY tips that will completely transform your space.
5. Budget for an Accountant
You may think spending money on someone to manage your money is wasteful, but you will be surprised how quickly they can pay for their time.
Accountants can help you find tax breaks you probably have never heard of and ensure you are properly organized should you ever get audited by the IRS. Allowing a professional to handle some financial aspects means less stress for you.
Find Freedom in Your Freelance Career
With these finance tips, you are well on your way to an amazing freelance career. It can be scary venturing out on your own, but the freedom is second to none.
Looking for some pointers on how to move up quickly as the boss of your own company? Check out these style pointers that will impress every potential client you encounter!
