Creating a budget is imperative for any adult, but it is especially necessary for freelancers. As a freelancer, you are technically considered a business owner, meaning that you have to be more financially responsible than other workers. This makes it imperative to know smart finance tips for freelancers.
For those starting out in freelancing, learning how to be financially savvy is tough, especially if you’ve never done any freelance work before. Here are the four smartest finance tips for freelancers.
4 Smart Finance Tips for Freelancers
1. Set Freelance Financial Goals
First things first, make sure you set financial goals for yourself. Successful financial goals will keep you on track and ensure that you make enough to sustain your own lifestyle. Here are some things to consider when setting your financial goals as a freelancer:
- How much do I need to pay all bills?
- How much do I need to pay all bills and have extra spending money?
- How much do I need to live a comfortable lifestyle?
Figure out the answer to every one of these questions. From there, look at past months and your current assignments to estimate how much you make. You may need to approximate how much extra work you need to take on to reach your goals.
2. Create a Slush Fund
One problem that freelancers face unlike other careers is that work is not always stable. Freelancers need to create a slush fund. A slush fund gives you a little extra spending money whenever you are running low on jobs or clients a particular month. Aim to have $5,000 to $10,000 in your slush fund to help you through when times are tough.
3. Keep Log of Your Freelance Work
Make sure to be diligent in logging your work. Since you have to file your own taxes, you need to know exactly what your income is. If you work through sites like Upwork, they tend to log the work for you, making it easy to know your income. For any work you do outside of freelancing sites, it is wise to keep an Excel spreadsheet and update it diligently.
Make sure to add the client, date of payment, and amount. For your own purposes, it may also be helpful to log how much time you spent on the job. This helps you to maximize your time and efficiency.
4. Pay Quarterlies
When you run a business, you can file quarterly payments towards your tax bill. In many ways, this works much like withholding a paycheck. For freelancers, paying quarterlies is advantageous because it means you don’t end up with a huge tax bill in the spring.
If you don’t want to pay quarterly, take about 30% off of every paycheck you get and set it aside in a separate account. That way, you will have extra money already separate for tax season.
Smart Finance Tips for Freelancers: Final Thoughts
Freelancing is a great way to work for yourself and live a much freer lifestyle, but the financial side of things can be a bit confusing. Make sure to set goals and be smart with your money. Not to mention, pay your quarterlies and track all work.