6 Important Financial Tips For Freelancers

6 Important Financial Tips For Freelancers

Daniel Hall 21/10/2021
6 Important Financial Tips For Freelancers

Freelancers can find themselves in a very precarious financial situation.

A freelancer who does not have the reserves of cash they'll need to get them through any number of income-free months without dipping into their savings is unwise. They need to prepare for the worst so that it doesn't happen at all or, if it does, they are better prepared than not. Here are 6 important financial tips for freelancers. 

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1) Keep Receipts

This is a simple and obvious tip, but it can save you when the time comes to file taxes. It's good to keep receipts for larger purchases such as computers or business-related travel to show that necessary tax deductions were taken. Keep receipts even for small expenditures if you're prone to forgetfulness, having them may prove that they were business expenses and thus deductible. A great option is to use the best receipt app you can find to save receipts and prevent the headache of digging through shoe boxes trying to find that last receipt. This will also help you to save time when tax season comes around. Some apps are free, and can automatically organize your receipts into digital files with searchable tags based on the info you enter for each receipt and it's available everywhere so I can look up any of my receipts at any time.

2) Keep Track Of Your Expenses

As a freelancer, you will likely be reimbursed for many of your expenses (a form of profit-sharing). It's important to keep those receipts since they may need to be submitted as proof of an expense or legitimate business payment. If you lack the time or energy to keep track of these on your own, find an app that will do it for you. If you have a self-employed job, it's also essential to keep track of the miles driven to calculate tax deductions on your car expenses. The best mileage app will automatically record all trips and calculate distances so you don't have to worry about manually tracking them down later.

3) Maintain A Separate Account

This may seem obvious, but some freelancers neglect this important step. You should set up a special banking account that is used solely for business income and expenses (that includes savings!). This helps prevent fraud or overspending from creeping into personal accounts which can make its way back around when it's time to file taxes and things become a nightmare. Since you'll be balancing your business income with your income on the same account, it's important to keep accurate records on how much money is coming in from each source. 

4) Try To Be Frugal

This tip may seem obvious as well, but it can't hurt to remind freelancers of this important aspect of keeping expenses low while making a profit. You need to watch what you spend if you want to make a profit and not lose money over time due to monthly overhead expenses. It may seem like common sense, but being more conscious about how you spend will help prevent runaway spending without helping you to be more careful when you do spend. 

5) Always Be Prepared For The Best And The Worst

To protect your business finances, you must be prepared for the worst. As a freelancer, unexpected expenses or income loss can happen unexpectedly at any time and leave you caught off guard. Prepare for the worst by having enough money saved in case of an emergency, if possible, get business insurance. Make sure there is enough cash-in-hand should you need to pay suppliers or other early payment penalties, get legal protection, learn about tax laws and how they affect freelancers like yourself, etc...

6) Relax (But Not Too Much!)

Freelancers can find themselves in a very precarious financial situation. A freelancer who does not have the reserves of cash they'll need to get them through any number of income-free months without dipping into their savings is unwise. They need to prepare for the worst so that it doesn't happen at all or, if it does, they are better prepared than not. Relaxing and enjoying life while doing what you love may seem ideal, but don't forget why you do this! You should make time to work hard and always be thinking about how you will survive after your next paycheck runs out, because the next one may too unless you look ahead instead of idling at the present moment. 

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Freelancers need to take care of the financial aspects of their business and set up a system that works best for them. Being organized, tracking expenses, maintaining a separate account, staying frugal, planning, and taking time to relax. These are all essential pieces to setting up your freelance career on solid ground.

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Daniel Hall

Business Expert

Daniel Hall is an experienced digital marketer, author and world traveller. He spends a lot of his free time flipping through books and learning about a plethora of topics.

 

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