Freelancing can be one of the most rewarding career choices you will ever make. It gives you independence, control, and freedom to do work on your own terms. But while it has it perks, it also comes with several challenges – and managing your finances perhaps comes at the top of the list.
If you’re taking the freelancing route – or still planning to – it’s important that you know the basics of managing your income well so you enjoy the full freedom of working for yourself. Here are some tips to help you.
Create an emergency fund
As a freelancer, you don’t get to enjoy some of the benefits of office workers like getting life or health insurance and the ability to take out a salary loan. This is why it’s important that you build an emergency fund to prepare for leaner months. This fund should only be used in times of urgent need or if you have to cover basic expenses and have no other fund sources. It’s advisable to stash money that can support you for at least six to eight months. If you have already built a sizeable emergency fund, you won’t have to worry about missing payments if, for instance, your clients fail to pay on time, or if you have a job offer that don’t feel like taking yet.
Track earnings, expenses, and taxes
Be sure to track and record all freelancing income, no matter how small the project you worked on. This will be helpful once you file taxes. Also don’t forget record all work-related expenses. This includes advertising fees, subscription fees to job alerts or related services, as well as Paypal charges. Also make sure that your records are updated. You can set aside a specific day of the week where you can review and go through all your records for the week. Familiarize yourself with the tax deadlines and enter them into your calendar so you can avoid paying tax penalties.
Separate personal and business accounts
Keeping separate bank accounts for personal and business purposes will not only help you create a good budget, but it will also ease your headache come tax time. To avoid the hassle of having to keep checking your accounts, you can enroll in a bank that allows you to make online transactions and fund transfers.
Use finance apps and tools
There are numerous apps and online tools today that can help you keep track of your finances. A lot of them are user-friendly and definitely cheaper compared to traditional accountants. For instance, if you want an easy way to create a budget, track expenses, and pay your bills, there’s Mint. To stay on top of taxes, as well as track income and expenses, you can try Quickbooks.
A lot of freelancers don’t want to talk about money – but it is a crucial part of succeeding in the freelancing world. By keeping accurate records, creating an emergency fund, and using helpful online tools and apps, on top of other strategies, you can get the most from your freelancing income. Make every peso count now by following these tips.
This is a Guest Post from Kash Avena has been with Loansolutions.ph in marketing and business development roles since 2014. Now based overseas, she is happy purveyor of financial literacy for OFWs and their families.