Setting Up Your Finances as a Freelancer
If you are new to the world of freelancing, you probably do not have much experience in managing your finances. You will need to consider taxes, among other factors.
How you manage your finances will impact how you succeed as a freelancer, no matter the type of work you do. You will want to learn to keep accurate records of your funds coming in and out, as well as ways to improve your business.
Here’s how you can get started.
Keep Personal and Business Money Separate
Before you get too deep into freelancing, it will help if you create another savings account. There are plenty of banks out there with online services, allowing you to track everything easily from any device.
Having separate accounts will help you set aside money for taxes, business costs, and other freelancing expenses. Plus, doing so will allow you to see better if you do not spend more than what you have for your personal business.
Additionally, this gives you a better way to track all of your income. You need to record this information yourself, especially if you will not receive a 1099 form for your taxes. That way, you know exactly what to expect when you need to file.
Plus, you will also need to record cash and online exchanges, such as when you receive a payment through PayPal.
Update Your Records Often
You will want to come up with a record-keeping system that works well for you. Everyone might have a different method that works the best for them- it does take some experimenting to find it. You can set aside one day of the week to look over what you did previously and record everything accurately.
Plus, it helps if you go over all of your financial records again at the end of the month. It might feel a bit tedious, but trust us, it will be worth it for your freelancing career. We recommend setting a reminder on your phone, so you do not forget.
Don’t Wait to File Taxes
As a freelancer, you should be one of the first people to file your taxes. You can prepare everything beforehand, then submit when the forms are due. Doing it earlier is much better than filing them at the last minute- which can create many problems.
As a freelancer, your taxes are going to be more complicated than someone else’s taxes, which have a W-2 included. You have more forms to file, more deductions, and more finances to report.
Taxes are complicated for many people, but when you put off filing your returns, you make them a lot more complicated and put more pressure on yourself. Besides, if you file late, you are going to accrue some fines- which can quickly add up.
Keep Your Finances Organized
You will want to do your best to keep everything organized. While having separate accounts does help with this, you will also want to take some extra steps to keep everything easy to find.
One idea would be to create spreadsheets to track your finances. Dedicated apps and even a physical notebook are also good ideas. Whenever you enter funds manually, make sure that you do so correctly.
If you are unsure of how to track money yourself, there are professional services available to you. For instance, Intuit’s QuickBooks is one option, although there are plenty more similar services online.
These bookkeeping services track your income and spending when linked with your freelancing accounts. They also will calculate how much money you owe in self-employment taxes.
Plus, by keeping organized, you will feel a lot more free in your work. There will be less stress and worry as you check on your income and expenses from running your freelancing work.
Know Your Rates
Finally, you will want to know your rates. You will want to compare how much you are currently charging and how much you should be charging. A beginning freelance writer or editor can expect between $25 and $30 per hour when starting out. The more experience you have, the more you can charge without being unreasonable.
However, if you are charging too much, you may not see many clients. But, you do not want to undercharge yourself either. You will want to compare rates from other freelancers doing similar types of work as you are. That makes a decent base; then you can go from there.
Overall, there are many ways for freelancers to manage their finances. Once you learn, it will feel natural- making it easier to save money and navigate your tax forms.
This article was originally posted at Freelancing buzz.