8 Best Money Tips For Freelancers
Learning how to budget, when your income fluctuates takes time and discipline, but it can be done.
If you worked as a freelancer in your cabin, you are not alone. Fifteen million people in the United States (about a tenth of the workforce) have abandoned traditional career paths to work in freelance positions.
Professional freelancers can take many forms, from regular working hours for a single employer to a flexible schedule that changes weekly. This usually means that you need discipline with your budget. As your own boss, you have to take care of your personal finances, your private insurance, and your own retirement savings.
Your financial life does not have to be unpredictable just because your paycheck might be. Here are eight ways you can smooth out your financial situation – and even save when your income fluctuates.
1) Keep an eye on your time:
Time is money, maybe more for freelancers than anyone else. And since it’s up to you to track your time, you’ll find a system that works for you. Search Online: Many Timekeeping Apps help you easily track the time you spend with different customers.
2) Create a monthly budget:
When you plan, it is common first to make a note of your net income. For freelancers, it’s probably more useful for you to start spending. Start recording what you need to get rental or mortgage, utilities, car or student loans, food – and make a note of the number. This will help you determine what you need to do your freelance work.
You can also create a second budget that contains all your wishes, such as: dinner, weekend trips or a new smartphone. Learn how much you need to work and earn to live your lifestyle. Do not forget to consider saving and retirement planning as part of both budget options. Read steps 3 and 6 to learn more.
3) Build an emergency fund:
Experts recommend that employees put aside at least three (ideally nine) months of money in the event of a financial emergency. But if your paychecks vary, you should think about a period of nine to twelve months. This will give you a cushion if you are between projects or have unexpected expenses. If you have survivors or fixed expenses like a mortgage or a car payment, you are aiming for the higher end of the saving spectrum.
4) Back up your data:
When it comes to emergencies, few things are worse than making an appointment, losing the job in the last hour, and making up for lost time. Time is valuable, especially if you work freelance and if you work with it, you may lose the opportunity to land other paid gigs. Back up your data frequently with an external hard drive and / or a cloud-based service.
5) File Quarterly Taxes:
If you are self-employed and expect to owe $ 1,000 or more in federal income tax, the IRS requires you to file estimated quarterly taxes. You may also have to make estimated tax payments if your tax was higher than zero in the previous year.
If you are not sure what rules apply to you, you should consult the IRS rules on estimated taxes for more details and consult an accountant. Even if you do not have to do this when you charge quarterly fees, you can pay your taxes four times a year in smaller increments instead of saving for a significant lump sum.
6) Save Yourself:
As your own boss, you need to take retirement savings into your own hands – and you will not have any perks like adequate means to stimulate you. Self-employed people have several options for retirement savings accounts, including one person 401 (k).
It’s a good idea to schedule automatic transfers from your checking account to your retirement account to make sure your savings plan stays on track. Just make sure you have enough money every month to cover the transfer. Also, remember that you can increase your savings with pitfalls like tax refunds or large customer payments whenever you can.
7) Obtain disability insurance:
Disability insurance can provide you with income if you have an accident or illness that prevents you from working. The income can keep you from getting into debt to cover your basic expenses while lying. Be sure to get a policy with your own professional driver. Without it, your insurance company might refuse to pay you if you think you can make money outside of your current employment – possibly on a job that pays only a minimum wage.
8) Consider a separate bank account:
Creating a separate account for your freelance business can help you monitor your income. You may want to open a small checking account that provides you with tools to track your business expenses. Pay a salary by transferring money to your personal account. This feature can be especially helpful when the control time is running. The documents you need to apply for an account and the type of account you qualify for can vary. So make sure you do some research.
US Bureau of Labor Statistics, 2016
The material provided on this website is for informational purposes only and is not intended for financial or investment advice. Consult your own financial professional when making decisions about your financial or investment options.