The best thing about being a freelancer is the freedom to choose your own hours and to carefully select which projects you want to work on, and, more importantly, which you don’t want to contribute to. One of the hardest parts of being a freelancer is budgeting and trying to keep on top of your finances. Many freelancers ended up in terrible tangles as they don’t keep up with their ingoing and outgoing expenses and end up falling into debt. Make sure that doesn’t happen to you with our handy guide:
Work Out Your Average Monthly Wage
One of the joys of being a freelancer is not knowing what you’re going to be doing next, but this can really screw with your finances. Just like workers with salaries, you still have to pay rent, sort your bills and eat, so you need to come up with a plan where you can still do this, even during fallow periods.
Set up a spreadsheet (you only need to do this once) and enter in all your monthly expenses. Then enter in your income for the last year and work out what you get on average every month. Once you’ve worked that out, try as hard as you can to stick to that budget every month, even if you earn more than that.
You can adjust as time goes on and hopefully your income increases, but for now, come up with a monthly figure and live by it.
Set Up Separate Bank Accounts
The most successful full time freelancers think of themselves as businesses and you’ve got to do the same. Set up a separate bank account and use that to pay for all your business expenses. You can pay yourself a monthly salary from this each month too. It will also make things much easier when it comes to working out what you owe the taxman.
Get Your Head Around The Tax System (Or Find Someone To Do It For You)
Working out how much tax you owe is hellishly complicated and it takes a time to work out what you can deduct. You are entitled to claim for a proportion of your heating, lighting, cleaning, rent, council tax and water rates if you work from home. You can claim for the running costs of a car and for expenses on travel for business.
You cannot however claim for food or decoration. All these expenses are also governed by all sorts of clauses, so if you really want to minimise your taxes, get an accountant.
Save When You Can
If you’re having a good spell of picking up work, make sure you don’t get carried away and spend all your excess income. Save what you can, thereby creating a nest egg to rely if times get tough and the work dries up.
Author Bio: This article was written by Rachel Hurley a content writer for AreaVibes, the zip code and location experts.
Category: Tips and Tricks
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