When you support yourself through freelancing, managing your finances can be one of the hardest challenges you face. If you’re leaving a salaried job, no longer will you have a steady deposit into your bank account every pay period. However, with a little planning, mindfulness, and these few tips, you can make the process of tracking your money a little easier.Top tips on how to manage your finances properly as a beginner freelancer.These are my tips of managing your finances as a freelancer.
- Keep Track of Everything
If you don’t already have a basic spending budget in place, you’re already making the biggest finance mistake possible. Since you are your own business, your budget should include both personal expenses (rent, food, entertainment) and business expenses (equipment, taxes, work materials). It may help to allocate your funds into different accounts to make it clearer to yourself what amounts you can spend on different things.
And don’t be mistaken when it comes to keeping track of everything – “everything” means everything. Every cup of coffee you buy, your Netflix subscription, the impulse candy in the check-out line – everything. It may sound like more work than it’s worth, but it’s not. You’d be surprised at how much you underestimate your daily expenses.
Figure out how much you spend in a month and from there you’ll learn what kind of income you need to be making to stay afloat.
- Save When You Can
It’s often feast-or-famine for a lot of freelancers who see work come in inconsistent waves. Some days (or months, or weeks), you might not have a single project on the table, while other times will see you with more than you can handle. That’s why it’s important to save money during these busy periods, so you’ll have a safety net for slow times. A good budget can help you figure out just how much you need to put away to stay afloat for a given period of time. Plan for the worst-case scenario – and don’t be ashamed of picking up a part-time job here and there, if that’s what you need to pay the bills.
Savings can also be found during tax season, believe it or not. Since you’re running your own business, you have certain opportunities to make tax write-offs. If you buy new equipment or take a client out to dinner to talk business, you can make note of them during tax season and save yourself a little money.
- Consider Taking Out a Loan
The prospect of loan debt might sound unappealing to you, but sometimes a loan is what many freelancers need to first get on their feet. As the saying goes, you have to spend money to make money. A small loan can help you with the transition period if you’re someone who’s going from working a full-time salaried position to freelancing. It can be hard to get a business loan from big banks, but big banks aren’t the only options for loans.
For those based in Finland, Lainaa-Heti is a service that allows freelancers to search and compare loan options. Always be prepared to shop around when looking for a loan – you don’t want to get in over your head, especially if you have things like student debt waiting for you.
- Look to the Future
Do you have any long-term savings goals or retirement plans in place? An increasing number of people around the world don’t have enough saved to last them throughout retirement. There are a huge number of economic factors that play into this, many of which are outside of the average person’s control, but ultimately, that makes it all the more important for freelancers to do what’s within their power to ensure a secure future. Your savings shouldn’t just be for a rainy day.
When you’re first starting out, it can be tempting to think, “I’ll worry about this later,” but you shouldn’t fall into that way of thinking, or else “later” will become “too late.” Put away as much as you can into savings and retirement, even if it’s only a few dollars per invoice. As your freelancing business grows, you should periodically reassess how much you have saved and how much more you need to save and adjust your budget from there.