If you’ve traded your cubicle with becoming a freelancer, you are in for some exciting times!
Freelancing allows you to work on projects you are truly passionate about, while also providing you a flexible schedule. Becoming your own boss, gives you control over the quality of work and the type of clients you want.
On the flipside, freelancing also means more responsibility in terms of your work and finances. Being your own boss can be exhilarating but also pushes you to manage everything on your own amidst all the uncertainties.
So here are some smart tips for all you freelancers out there on how to handle your finance and how to save money as a freelancer.
1. Consider Maintaining a Separate Bank Account and Track Everything
First of all, get separate accounts for your personal and business spending. This will help you monitor your income and allocate a budget for your future business projects. With a business account you can quickly manage all incomings & outgoings, and pay yourself a monthly salary. You need to know everything you are spending money on - this will not only help you stay organized but also help you analyse your spending patterns and take necessary steps.
2. Create a Budget
Budgeting for a freelancer is crucial because you may not have a consistent monthly income to fall back on. Start by listing down your expenses - include both your fixed and discretionary expenditures. Now you know how much income you need to generate in order to meet your expenses and have enough money left over to save and invest. Now you need to work backwards - if you know how much income you need to meet your expenses and savings, then you need to set up your client list to ensure that you hit that number every month.
3. Plan for Ups and Downs
The one word that comes to mind when you think of freelancing is uncertainty. So when you start on this journey it’s something you must accept and work around. Since your income may look vastly different from month to month, it’s important that you plan your finances during the slower months. To measure this, calculate your average income and that will provide you a baseline for your budget.
4. Seek Out for Long-Term Work
While one-off projects may be exciting, a consistent set of clients keeps you going during the slower months and prevents the unpredictable nature of work. Also, after some time constantly looking for work will get exhausting and time consuming. Eventually the clients that you have long-term engagements with will form the cornerstone of your freelancing business. In order to do this, ask a few engaged clients to give you a 6 month to 1 year contract. This is a good way to maximize your money.
5. Save Extra for Taxes
This tip is especially for all you new freelancers out there - As a soie business owner you should budget for taxes as you don’t want to land in trouble later. The thumb rule is to save around 20% of your income towards paying taxes.
We hope these 5 tips helped you in your freelancing journey. When you manage your finances, you’ll be able to better focus on growing your business and hitting your personal goals. Remember, it takes time and patience to learn the ropes of freelancing, so keep at it and never lose hope.
