Operating a freelance business is similar to running a company, except you have to fill all vacancies. Most companies worry about how they can save money and what happens to their money. A freelancer’s diligent work often wishes you had more savings to cover unexpected expenses or invest for growth.
Here are some effective strategies to save money as a freelancer that you should incorporate into your daily routine. By doing so, you won’t have to spend time-saving money actively, and you’ll be able to focus on your work because you’ll be less stressed.
You don’t have to worry about your financial life being unstable because of your paycheck. Keeping your financial situation in control and even saving while your income fluctuates is possible with these tips.
1. Make a monthly budget.
Generally, you begin by noting your net income when creating a budget. You will find it helpful to start with the expenses if you are a freelancer. Identify all the expenses you need to survive – rent or mortgage, utilities, car payments or student loans, groceries – and note the amount. By doing this, you can figure out how much you need to earn from your freelance work.
If you’d like, you can also create a second budget that includes everything you’d like, such as weekend getaways, night-outs with friends, or a new smartphone. In this way, you’ll know how much you’ll need to work and earn to live the lifestyle you desire. As a part of both budget options, consider saving and retirement planning. Learn more about these steps.
2. Back up your data
The last thing we need is emergencies when trying to meet a deadline and losing our work in the final hour, and scrambling to catch up. You might be losing out on other paying jobs if you use your time to redo work when you’re a freelancer.
3. File quarterly taxes
Self-employed individuals with estimated federal income tax liabilities of $1,000 or more must file quarterly estimated federal income taxes with the IRS. If your taxes were more significant than zero in the previous year, you might also have to make estimated tax payments.
Consult an accountant if you are unsure which rules apply to you and for more information on estimated taxes. Whether or not you’re required to file quarterly taxes, doing so lets you pay your taxes in more small amounts four times annually instead of saving up for a large lump sum.
4. Save for retirement
When you are your boss, you are responsible for saving for retirement on your own- and you won’t have any incentives such as matching funds. There are several options for self-employed people interested in saving for retirement, such as an individual 401(k).
Ensure you will have enough money to cover the transfer each month. Use windfalls, such as tax refunds and large payments from clients to boost your savings.
6. Get disability insurance
Having disability insurance can help you maintain your income in the event of illness or injury that prevents you from working. While you’re unable to work, you can use the income to pay your expenses for your basic needs. Ensure that your policy has an own-occupation rider. You may not receive your benefit if your insurance company feels you can earn money outside of your present employment, and that job may only pay minimum wage.
7. Consider a separate bank account.
Managing your freelance business income better can be achieved by setting up a separate account. Keeping track of your business expenses will be easier if you open a small business checking account. Transferring money to your account is easy to pay yourself a salary. Doing this is particularly useful during tax season. You may need different documents and qualify for different types of accounts, so research is essential.
Bottom line
Freelancers don’t need to be afraid of managing money. Good command of your cash flow is imperative, as is being aware at all times of where your money goes. You can keep a budget, save, and spend wisely on your business – and yourself – as long as you stay organized.