Everyone who has started a freelancing career knows that managing finances can either bring you more freedom and happiness in life or can become your worst nightmare.
Successful freelancers have found perfect ways to manage their finances and to gain security and stability, but for a newbie, remote workers things are not that simple. If you’ve just switched from your previous 9 to 5 job to freelancing and online work, these tips and advice will help you a lot.
Creating a stable budget may be challenging in freelancing
First of all, you need to be aware of the fact that your finances won’t be the same every month. Or better said, most freelancers are not tied to one or two clients only – their finances change from time to time. That doesn’t mean that you shouldn’t track your earnings, but the opposite – create a freelance income tracker.
Tracking income when you have tons of work and dozens of different clients may sound like a mental health challenge, yet you can use a simple spreadsheet. For those who want to track everything and find out if some project pays off, you can also track worked hours. All this will not only help you to have stable finances, but also realize what projects are worth it, and what aren’t.
Successful freelancers know about these little secrets
Successful freelancers do things differently – they have a separate bank account for freelancing and remote work. This way, it will be much easier for you to track your earnings and invoices. Search for online banks that offer you features such as free sign-up, free management, fee-free transfer, and deposit, free mobile deposits, and so on.
It’s also very important that you calculate and plan ahead – remember that even when the invoice is paid, you’ll still have to wait for at least a few days until you’ll be able to transfer money to your bank account or a credit card. It’s good to think about automating the invoices as well. This app will help you to create and manage invoices on time. Those who aren’t familiar with such practices usually have trouble with calculating tax money too.
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Don’t fall into a vicious circle where you constantly borrow money from yourself – this becomes very tiring because you constantly spend money that is about to arrive. Such a habit may even lead to a loss of motivation for freelance work.
It’s not just about how much you earn, but also how much you spend
If you have no idea where your money goes, it may mean that you are usually overspending. Think of everything you pay for but don’t use. For example, many freelancers realize that they are paying different subscriptions they once used, but don’t anymore. Are there some other apps and programs you pay for but don’t use?
You’ll have to organize your personal life as well – set priorities. Create a spreadsheet for this too. It’s good to track your expenses for one month and then you’ll be able to realize where your money goes. Bills, food, clothes, tech gear, family time, children, pets, sports, hobbies – create different categories according to your lifestyle and track every single expense down. Trust us, at the end of the month you’ll be very surprised with the expense spreadsheet.
Once you’ve realized where your money goes, you’ll be able not only to cut down some unnecessary expenses but also to see where you can invest better.
Automate different payments that can be automated and that are the same or similar every month, like certain bills or childcare, gym membership, etc.
How to save money as a freelancer?
Everybody should think about saving money, if not for your retirement, then for that planned vacation you look forward to. If you never saved money, it’s good to start with 10% of your monthly income. It doesn’t have to be anything huge, but as long as you succeed in putting money on the side, you’re on the right track.
Freelancers must also think about saving money for those periods when they won’t have projects and be able to work online. Many claims that it’s a must to have saving for at least 2 months of living costs. You know how much you need, so it’s a good idea to save because your finances in freelancing may not be stable all the time. That’s what freelancing is all about – up and down periods.
Think about investing in the right insurance
Good insurance will not only make you feel a lot safer but will also help you avoid unplanned business spending. An example can be a broken laptop while you were traveling. Such unplanned expenses and situations can not only cost you but can also prevent you from continuing to freelance for a while and earn money as planned. Health insurance is a must as well, but if you’re a freelancer who loves traveling while working – if you’re a digital nomad, don’t forget to think about travel insurance as well.
Conclusion
Overall, you’ll probably already realize that in freelancing everything is up to you. Yes, you’ll definitely gain more freedom than with your 9 to 5 office job, but with freedom comes responsibility. Successful freelancers who have been doing remote work for years have created passive incomes as well. You can check more about that in this article.
Tracking your finances as a freelancer is a never-ending process, but don’t look at it in a negative manner and as something that just has to be done. Once you gain full control over your freelance finances, you’ll be able to improve your business on a weekly and monthly basis. Everything will become much clearer, and you’ll certainly expand your online business and improve your services much easier.
If you’ve realized that all this is very confusing and that you are not as good at finances as you thought you’ll be, maybe you’d do better as an employee. This article will help you to make the right decision – to become an independent freelancer, or to become an employee first.
Ready to upgrade your finances but still think that you won’t be able to do it successfully? Many freelancers have already got professional help with the purpose to get their finances in order and make them stable. Accountants can help you understand how taxes work as well. Many new freelancers get lost in the process at first. You can also get useful advice related to cutting down expenses and investing in the right direction, which is crucial if you’re running an online business.
