Thinking of venturing into the world of freelancing? Well, congrats and good for you – you couldn’t have taken a much better decision.
But wait a minute – if you are yet to enter into freelancing, then, you should know that it is all about managing your finances as much as pursuing your dream gig on your own schedule.
No matter which field you are planning to venture as a freelancer, the real thing is that you are going to spend half of your time handling things that will be quite new to you – signing contracts, managing workflow, filing taxes, and so on.
And no – despite how much you hate finances, you have to deal with them at some point of your life; and do you know that most make mistakes when it comes to managing their finances?
But you don’t have to go through the same way – in fact, there are a few pointers that you can take note of when you are about to freelance, because – it will save you a whole lot of headaches and extravagant fees and penalties down the line.
Venturing off without any savings in the account
When you have just started to freelance, you should do well to remember that it’s not going to be easy at first – at the very first moment, you are not going to land your dream clients, in fact, this takes time; and that means, doing very mediocre projects at the begging of your freelancing career.
In those moments, how do you plan to go ahead? You do so – yes, you have guessed it right – by using your own personal savings. Always start your freelancing career with enough money in your bank account so that it can get you over bad times until payments come through from your projects.
Keeping business and personal finances separate
You may wonder as to what’s the use of keeping business and personal finances separate – granted, it will keep you on your toes with having to manage multiple cards and accounts, but in the long run, you will thank yourself when you will find it much easier to fill your business tax as you won’t have to remember how much you have made from your freelancing projects.
It is suggested that you keep one bank account for your personal savings and another one for your freelancing career.
Keeping a separate business credit card
Now, that you have decided to manage a different bank account for your freelancing career, why not opt for keeping a separate credit card for that account?
Doing so will make it much easier for you to track your expenses, should they occur (and trust us, it will) when running your freelancing business.
Setting up the right business structure
There are many freelancers, who simply start working when they decide to go full-time, and yes, this leads to a sole-proprietorship, but the main problem is that they don’t think twice when it comes to registering their business.
Not registering a freelancing business often leads to missed legal protections for personal assets and tax benefits. You don’t want to happen that with you, right?
How about getting in talks with either an accountant or lawyer and discuss with them as to which business form suits you best? It may take time to register your business, but it will be worth it in the end.
Deducting wrongly or not deducting at all
Do you know that when it comes to taxes, there are a few set rules on what you can deduct and what you can’t – and if that sounds like a headache to you, you can take the help of your accountant or lawyer when filing your taxes.
They will gladly help you – and yes, there may be some fees that you will need to avail when accepting their services, but it will be totally worth it in the long run, or else, you will be spending a whole lot of unnecessary spending on your taxes as penalties.
Managing your workflow
So, how many projects do you have this month? Have you completed all of them? What about the invoices?
If you feel like you are not able to answer these questions, then, you are probably not doing it right. In that case, how about taking the help of a management system software like ‘AND CO’ or ‘Trello’?
Software like ‘AND CO’ and ‘Trello’ – they can help you in managing your workflow as they can create invoices, send out reminders, track expenses, and many more.
Charging consistent rates
When you are just starting out in freelancing, it may be a bit confusing on what should you charge your clients. Should you charge a high rate? And if you see an unsuspecting client, should you raise your rates?
See, they are confusing – but, it need not be. Okay, at first, you will spend a whole lot of time trying to figure out your worth, but – but, once, you have figured it out, you should try not to deviate from that path. Know your worth, and then, charge ethically – you will see that the client too, will understand you and your value, and will pay you accordingly.
And then, as time goes on, work hard to increase your value.
Understanding the payment cycles of the client
If you have landed a client for your freelancing project, the, you should do well to remember that you should confirm the payment circle – and it is best for the both of you, if you include their payment circle in writing and in the contract.
Make this into practice – it will help you a lot down the line, as it will let you know won when to expect payment from a client and will make it easy for you to handle your finances.
Thinking of the long-term route
Freelancers often tend to lose track of the time, but that shouldn’t mean that you should neglect your future. No matter how much you earn from your freelancing projects, you should always make it a point to save a few for the future during each month.
You never know, when you might need it, right?
We all make mistakes, and more so, when we are new at something and you know what – a lot of them can be fixed or even avoided, if you are well-prepared beforehand. So, how about buckling up and taking your finances seriously. Your future self will thank you.