Personal financial management for freelancers is an important undertaking as a means of knowing where they are financially and also as a way of meeting their tax responsibilities. For many freelancers however, bookkeeping and working at the same time is a challenge. Discussed below are tips that can help these freelancers overcome this problem.
Open a bank account for your freelance business
This will help you to know exact transactions related to your freelancing business. It will be easier to assess and determine what salary you can pay yourself for the work you do as a freelancer. A separate bank account will help you differentiate your freelance income from your other sources of personal income.
Save for the dry periods
Availability of freelance jobs can be erratic. Prepare for such months by putting some funds aside. Experts suggest that you have at least an equivalence of six months savings of your average monthly income. This will also protect you against difficulties that could arise if you are unable to work for sometimes.
Consider all your needs when making a quote for a job
As an independent contractor, it is your responsibility to meet all your financial responsibilities. These include:
- Health and other relevant insurance needs
- Retirement needs
- Tax obligations
- Personal savings
Taking all these needs into consideration will help you make a logical quote and avoid many freelancers mistake of quoting too low rates.
‘Time is money’ is a true saying all the time. It is easy to become lax with your time management because ‘you are your own boss’. This attitude can lead to last minute rush on jobs to beat a deadline. Organize yourself so that you work consistently and have other people respect your working ‘office hours’. If you are a family person, separate your working time from family time even if you are working from home.
Asses and see how you spend your time. Track it and see the changes you could make to enhance productivity. Limit unnecessary time wasters such as mindlessly surfing the net or spending too much time on social media or checking emails.
Have a budget
Determine your average monthly income and average monthly expenditure. What are your recurrent expenditure needs? What are the current one-time off financial needs that you need to cover?
Pay yourself a salary
If you were working for someone else, you would be qualified for a monthly check. Now that you are working for yourself, get a regular pay. This will boost your morale and motivate you to do more. Your pay will depend on your business’ annual income. Take the total and divide it by twelve to get a rough estimate of what you pay yourself. Remember it is from this pay that you will need to budget on and meet your other financial obligations already discussed.
Cast your net wider
Do not depend on one client no matter how reliable the arrangement appears to be. Have several instead because work from one client can suddenly end and you find yourself struggling for work and finances.
You cannot be everything in every way
Involve professionals in your business wherever necessary. This will save you time and costly mistakes in the long-run.
Invest your money
Have an investment plan that will assure you of an income to boost your monthly or annual income. Aim for investments that guarantee a passive income.
With these tips, a freelancer will not only make money from his services, but will also be able to keep and benefit from it.