Freelancing is an excellent way to take your finances into your own hands, and several perks come with being your own boss. However, with those perks, there also come responsibilities and difficulties. Read on to learn our top three money management tips for freelancers.
Build a Budget
After you switch to freelancing, the first step is to build your monthly budget. Look at the money you’ve spent over the past several months and take the average. Then, add around 10 percent as a cushion. Next, determine how much money you want to save from each paycheck.
When you’re new to freelancing, this combined figure may equal what you make, leaving no money left over as disposable income. While that may feel deflating, remember that most freelancers start small and work toward bigger paychecks—this doesn’t mean your budget will always look like this.
Keep Track of All Business Income and Expenses
Income and expenses are crucial come tax season—if you haven’t saved receipts and kept records, you’re in for a stressful month. While it may not feel nice to keep track of your income to pay taxes on it, saving receipts for your expenses is a great thing! You can deduct business expenses when filing your taxes, so things like an office chair or a new desk are deductible!
Start a Retirement Account
While it’s easy to live in the moment and use up all your money for expenses and disposable income, you’re only hurting your future self. Regardless of your age, it’s critical to set up a retirement account so you have a nest egg ready when you’re older. The best retirement plan for freelancers is the Solo 401(k), since you don’t need a company of a particular size to open the account.
Now that you know our top three money management tips for freelancers, save responsibly and enjoy a life in which you make the rules.