Image Source: Pexels
Freelancing can sound fun, perhaps even glamorous, at first glance. Once you make the dive into the gig economy, though, it doesn’t take long for reality to set in. Finding work, managing your time, staying motivated, and tending to administrative duties can quickly sap your initial enthusiasm.
That doesn't mean freelancing isn’t worth it. There are many perks that come with the lifestyle, such as flexible work hours and a high degree of control over what you work on. Nevertheless, assuming that freelancing is the ticket out of all of your professional pressures and stresses is wrong.
Simply put, there are many challenges that come with freelancing — especially when it comes to the financial side of things. However, there are several steps that you can take to ensure that your financial situation doesn’t hold up your freelancing success.
Track and Organize Everything
When it comes to running your own business, organization is everything. Even if you’re a solopreneur with no employees, freelancing means the business buck stops with you. That said, if you want to stay in business, you’re going to need to take steps to stay organized. A few ways to do this include:
● Maintaining a spreadsheet or other document that tallies all of the work that you’ve completed.
● Keeping a separate document to track what you’ve actually been paid.
● Getting good bookkeeping software to help you manage expenses, invoices, and billing.
● Maintaining separate personal and business bank accounts so that business income and personal expenses don’t overlap.
● Establishing a work schedule that helps you keep tabs on every assignment that you have at any given moment.
● Setting clear rates so that you can remain consistent and ensure that you’re covering all of your costs.
Taking the time to get organized makes it much easier to keep track of your finances, regardless of if you’re in the red or black. In fact, proper organization helps you quickly understand when you have enough income and when you need to pick up more work.
Remember Your Taxes
It’s easy to remember taxes every April. As a freelancer, though, you need to continually keep them in mind year-round. Why? Because you can’t simply have taxes withheld from a paycheck,
Remember, you’re paying yourself. As such, it’s important that you take the time to address your tax needs on a regular basis. This includes:
● Meticulously tracking income (not what you’ve earned but what you’ve actually been paid).
● Keeping track of your expenses and deductions, as well.
● Calculating your taxes — this is usually roughly 25-30% of your income.
● Setting aside your taxes as you go along.
● Paying your state and federal estimated quarterly taxes every three months.
● Filing your self-employment taxes on time every year.
Freelancing is an overwhelming activity. Things like finding work, doing the work, and getting paid can soak up most of your time. However, in the midst of all of the hubbub, it’s critical that you still find the time to calculate, set aside, and pay your taxes throughout the year.
Once again, as a freelancer, you can’t lean on company hardware and software to keep you up and running. This includes security as much as anything else.
As you’re logging into company websites and managing your business banking, you want to ensure that you’re doing so in a safe and secure manner. You can do this in a few ways:
● Create strong passwords and use screen locks on your devices.
● Make sure you have appropriate digital security on your mobile device and computer.
● Avoid important logins and transactions on public WiFi.
● Keep all of your devices fully updated at all times.
Security is a crucial aspect of freelance finances, as failing to keep your devices safe can ultimately mean disaster.
Live Below Your Means
Finally, one of the simplest ways to stay financially secure as a freelancer is to simply live below your means. As your rates settle out and you find your sea legs, you’ll begin to have a rough idea of how much money you can make over the course of a month or even a year.
When this happens, you can create a budget that operates at 10-15% below that estimated number. For example, if you are aiming to make $40,000 in a year, set your budget for between $36,000 and $34,000 dollars.
On the one hand, this gives you some breathing room if you lose work and it takes some time to find a new stream of income. On the other hand, if you end up working through the year, you’ll have a chunk of extra change that you can invest or use as a rainy day fund the following year.
Staying Financially Secure
As a freelancer, you’ve taken your fate into your own hands. This goes for your finances as much as your career. This can feel daunting, but if you take steps to remain safe and secure in your monetary dealings, you can ultimately end up in a better place than you could ever be with a salary.
So consider your current fiscal state. Then review the tips above and see where you can make improvements in the name of a financially successful year spent freelancing.