How to Manage Your Finances If You Are a Freelancer? Tips That Can Make You More Financial Savvy!
A freelancer’s life is different from a full-time or long-term employee’s. Since they have flexible working hours and complete freedom to choose work. Although there are multiple benefits of being a freelancer, there are some things that a freelancer must consider. Some of the things that may affect your work are the unpredictable nature of work, and how to manage your time and resources with an unpredictable income. Freelancers also have to do without the perks that regular employees enjoy and there are other things to consider such as managing taxes, unforeseen expenses, and the late payment of employees.
However, with the right tips and tricks, you can manage the unsteady cash flow you can still make your freelancing job work. All you have to do is plan smart and the job will be extremely rewarding. Consider how can you make the most of your hard-earned money, here are some money hacks, financial advice for freelancers.
Track Your Income
The first step towards effectively managing your finances is keeping a check on your income. While you are a freelancer, sometimes it may seem difficult to track your earnings. When you track your earnings with diligence, you’ll be in a better position to deal with the good times and the not-so-good financial times in your life.
It is advisable to maintain a spreadsheet of your freelancing income and use the data to brace yourself for the upcoming uncertain financial times. When you track your income better you’ll also be able to manage even if you are financially wobbly at that time.
Keep A Tab on Your Expenses
Monitor your spending habits. Expenses do not only the fixed ones (it also includes rent, taxes, insurance) you simply cannot do without, but you can manage the flexible expenses. Keep a tab on your past monthly expenses and slash down the expenses where you can and that includes the on-spur shopping indulgences. Prepare your budget as you manage your average expenses with your average income and prepare a budget accordingly.
A little self-discipline will help save great savings that you can save for fulfilling your future dreams. In some cases working from home, can actually save big money as you do not have to spend on work lunches, parties, or commuting. Freelancers may have to spend on the basic amenities, such as an internet connection, and of course, you may have to spend on a computer and its maintenance. Some freelancers may have to invest in co-working spaces. Pick and choose the right rental place, which will cater to your budget.
Make The Right Budget
Intelligent budgeting is the backbone of a solid financial program. Manage your personal expenses along with your business expenses with great diligence and follow the 50/30/20 method. In this scheme, the after-tax income will be divided as 50% for necessities, 30% for flexible expenses, and 20% for your savings.
Keep separate bank accounts for managing your accounts better, a business account and a personal account, this will help you figure out your finances better.
Manage Your Taxes
Managing your taxes can turn out to be a cause for concern for freelancers. Ensure you file your annual tax return right at the onset, as doing it last minute will turn out to be a big headache for you. Also, missing deadlines will also incur unforeseen penalties and you will also end up missing a large chunk of receipts.
The best thing to do is to prudently manage the finances and file them as soon as you file your taxes for the previous year. There your last year’s tax return will act as your guideline. This way you’ll have enough time on your hand to check your expenses, and save a lot on your savings to leverage the tax bills. At least keep 25% of your income as savings for filing taxes.
Do Your Retirement Planning Right
Most freelancers forget about planning for their retirement at the peak of their career, yet it is one of the most important things to consider. As a freelancer, you do not have to make provisions for your retirement accounts. But most financial advisors will suggest that you need to invest at least 20% of your current income in the retirement scheme of your choice.
Freelancing income is never steady. But if you are able to manage your finances you’ll certainly be able to make the most of your finances and lead a balanced and happy life.
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