There is an exciting moment when you start working as a freelancer. You may feel that the pressures of work, in the traditional sense, melt away. You are in control of your life, your livelihood, and your finances. But your finances, it has to be said, require a lot more control, so you’ll need a guide to managing your finances While it’s incredibly empowering to pick and choose the jobs we want, this means that we’ve got to take a shrewd approach in looking after our finances. What can we do to ensure that we really do look after our finances while cultivating a lucrative freelance career?
More “Bank” For Your Buck
You might think that you can just use your standard bank account but when you are freelancing, it’s better to set up a different account. When you start to look at what freelancing entails, there’s a lot of expenses that you will need to claim for, and for clarity’s sake, it’s easier to see how much is coming into your business account without random payments for Amazon clogging up your bank statements. And if you already have a personal credit card, this can add more confusion if you try to use it for expenses. Choose the right bank account and card for your specific needs. A review of the American bank Capital One says it has a 9% market share in the credit card industry which can make it one of the more reliable banks. And choosing an institution to put your money in, especially when you are in complete control of your finances gives you that extra peace of mind.
The Importance Of Keeping Accurate Records
Many freelancers learn quickly the importance of keeping their own records. Whether it’s someone starting up their own business frantically scrambling for receipts to complete their tax return or the freelancer who has misplaced an invoice that contains a substantial amount of money, we need to get into the habit of keeping records. When we start out, there may not be much to keep track of. Gradually, after a while, you need a significant system for everything. If you need to keep a lot of receipts you’ve got to have an appropriate filing system. The great thing is, with various software like QuickBooks giving you the opportunity to take pictures of your receipts, and storing them online, you’ve got a handy database that is purpose-built. But it’s about finding the right system at the outset. Ultimately, when you are trying to keep track of your incoming versus your outgoings, a filing system will mean everything. Also, when it comes to the taxman, they will want to see accurate records. Or, if you decide that you need to hire an accountant, they will need to make sense of every little expenditure. Whatever you buy for the purposes of your freelance career, you’ll need to keep it, annotate it, and have a handy spreadsheet. Tallying up all those receipts at the end of the tax year can take days. Put a system in place.
Navigating Those Tricky Freelance Periods
Part of being a freelancer means having fallow periods. Financially speaking, this is one of the most common, yet frustrating, components of being a freelancer. While we can prepare for these difficult periods, by putting money aside, sometimes it is impossible. Bills go up, we have to make life changes, and this can mean that we are chasing our financial tail. And we have to remember that there is no shame in getting a side hustle. While many people that start dipping their toe into a freelance career build up a side hustle, you could also have a part-time job while still working as a freelancer. Many people now have no choice but to work in this fashion. And while you may feel it’s like you are taking a step back, you need to provide for your dependents. Being a new freelancer is tough, especially when you are constantly on the go trying to find clients and jobs. There is no shame in getting a way to pay the bills if you so need it.
Ensuring You Have Emergency Funds
Sure, it’s easy to say that you need an emergency fund. But as a freelancer, you’ve got to remember that there will be problems collecting money on occasion. Unfortunately, we don’t get paid on time all of the time. And if you are reliant on someone paying their invoice on time, this can be very stressful, not to mention frustrating. Having an emergency fund in place will help tide you over while waiting for that person to pay you back. Also, if they’re not paying you on time or causing problems, you can still chase them up with some authority. When we’re desperate for money, we can be the weaker party. Part of doing business is about being formal, yet forthright. And as a freelancer, when we don’t get paid and we’ve got a bill to pay, we can certainly go into panic mode. An emergency fund will be crucial to keep you ticking over. But it also worth thinking in the meantime how you can invest the money you already have. While stocks and shares are always a gamble, you could learn how to day trade in the meantime. It is also worth considering a passive income as a freelancer, as you may not be able to work exclusively in your chosen trade. Diversification is the name of the game in the modern world, especially when it comes to getting regular payment.
It is certainly a shock to the system when you are dipping your toe into the freelance world. Financially speaking, you could really begin to see how bad you were with money. But when we are looking for the goal of ultimate freelance freedom, and the ability to choose our own path it does mean that we have to be extra careful with our finances. It’s always worth looking at your expenditure, see where you can cut corners, but also learn to be financially savvy.
