Pixabay While working for yourself means having lots of freedom to set your schedule or choosing your clients you would like to work with, it also means you are solely responsible for delivering your work and managing your finances. From having to track your income for taxes, to finding your own health insurance, you will face a unique set of challenges financially when you go freelance. To help overcome these challenges, we put together 5 tips on financial management for freelancers. #1 OPEN A SEPARATE BANK ACCOUNT FOR BUSINESS TRANSACTIONS When you are freelancing, you are basically running your own business. This means you are required to keep full and accurate records and accounts of your business transactions from the start, and such records must be supported with invoices, receipts and other relevant documents. You will also need to prepare a statement of accounts consisting of profit and loss, as well as a balance sheet. With this in mind, you should open a separate bank account to track your income and business expenses apart from your personal expenses. A separate bank account will help avoid getting your business expenses tangled up with your personal expenses. In this way, you can effectively track your business expenses to see if you are investing enough or spending too much, and using these expenses to use it for claims as deductions when you file your annual tax returns. Plus, you will have a much easier time to monitor closely your income and see if you are hitting your goals. #2 SETTING ASIDE A PORTION OF EARNINGS INCOME FOR TAXES When you are earning your keeps as an employee, your employer will usually automatically prepare and declare for you your income for you to file your taxes. But as a freelancer, you are now running your own business, and this means the burden of tracking and managing taxes falls on your responsibility. Just as like running any businesses, a healthy cash flow is important, and so is paying taxes on time. It is your duty to ensure you have sufficient cash for taxes, and if you are to overspend your money and leaving insufficient funds to pay your tax obligations, you are likely to run afoul with tax laws. That is why it is a good habit to prepare ahead of time by setting aside 20 per cent to 30 per cent of income for taxes. This enables you to prepare adequately when the time comes for you to pay your taxes. #3 CONSIDER GETTING ADEQUATE INSURANCE Life is never a bed of roses; there are times where the unexpected happens. Unlike working as an employee, freelancers do not get typical benefits such as paid medical leave and medical insurance. This is why having adequate insurance coverage is important, as it will come in to protect yourself from any unforeseen financial burden should any misfortune happens. One insurance you may want to consider getting is the income replacement insurance. This insurance can protect you […]
