With 50% of the workforce set to be made up of freelancers by 2020, we’ve compiled a list of our top financial tips for freelancers. We understand the highs and lows of working for yourself, one of the lows can be managing your financial affairs and preparing for the future.
From budgets to saving it can be hard to know where to start and how to prioritise costs. These tips should help you to get off on the right foot and give you the freedom you set out to achieve when you began freelancing.
1) Build an emergency fund. Having a fund set aside for emergencies is essential. When you work for yourself and don’t have a guaranteed set income, it’s important to have something to fall back on when times are tough.
2) Have a separate business account. Keeping your business and personal accounts separate helps you to create distinction between the two. Don’t get lost in the mix up of your finances, it very rarely ends well. It also helps you to see if clients have paid on time and keep a check on your outgoings.
3) Pay yourself a wage. If you pay yourself a set amount each month it means you’ll be less likely to over-spend and gives you an idea of how much your business is bringing in once your work costs are taken away. You wouldn’t work for free elsewhere so don’t make yourself do it now.
4) Budget for tax. You know WHEN your tax bills will be due, and you can probably gage a rough guess at how much they’ll be. If you include these costs in your overall budget, they won’t be as much of a hit on your finances. You’re always going to have to pay them so the quicker they become a planned for cost the better.
5) Track everything. From food and drinks for clients at meetings to the travel costs of getting to the meetings. Everything needs to be accounted for. If you find yourself strapped for cash you’re able to see where you can make savings. When everything is tracked you can see how much progress you’re making or where things need to improve. If you’re looking for guidance on the best methods of tracking your finances, get in touch with us today.
6) Research apps built for freelancers. Whilst we offer plenty of services to help you, we understand apps can offer support alongside a professional accountant. Search the app store for software you can use on your mobile device to keep things in check.
7) Plan for peaks and falls. Just like any business, yours will have peaks and falls. But when you’re paying your own wage its your responsibility to plan for these so that you don’t struggle when business is slow. Be sensible and keep putting money aside for the falls.
8) Think about retirement as soon as you start. Everyone must retire. Even freelancers. Get advice on the best way to save for your retirement. Your personal and professional circumstances will determine the best place to save for retirement – we’re always happy to help with your plans. Get in touch with us via email@example.com or call us.
9) Don’t scale up unless you’re ready. When you’re freelancing it can be tempted to skip to the next stage before you’re truly ready. Make sure you have the funds to make the next jump and then some. These things almost always go over budget.
10) Use a milestone payment system for clients. When thinking about client payments, forget a one-off lump sum payment. It makes much more sense for them to pay in stages. That way they’re paying for the stage you will next complete. This means you’re not scrimping and saving until you get the next lump sum and you’re receiving a steady income from every client.
For advice and more information about freelance work and what we recommend, don’t hesitate to contact the team at ABC Accounting Services.
Call us on 01427 613613
Email us at firstname.lastname@example.org
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