Working on a freelance basis offers an individual a great amount of freedom, and it can lead to a great deal of personal fulfillment and career satisfaction. However, a freelancer does not typically enjoy the same kind of security that a salaried employee would. Additionally, a freelancer must subtract a certain percentage of their earnings for each job from their income and set it aside in order to pay taxes properly. A person who does freelance work for a living must be sure to budget and save money, so that her or she has money to spend on bills when work is temporarily slow or nonexistent.
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Create a Budget
One of the first financial steps that a freelancer can take is to devise a reasonable budget. All monthly bills, expenses, and sources of income should be considered. Many professionals divide their budgets into two categories: Personal and Professional. A budget should reflect the fact that a freelancer often deals with work that ebbs and flows in availability. One way to avoid excessive stress and worry is to pay all bills one month before they are due. This is one effective strategy for dealing with the inevitable slow times that every freelancer must face.
Be Consistent As U.S. News & World Report contributor Geoff Williams points out, a freelancer should avoid becoming complacent in terms of tracking spending. Being a freelancer means running a business, even if that business consists of only one person. In the same way that every cent that a business spends must be accounted for, a freelancer must be consistent about tracking every cent that is spent on a personal and professional basis. Doing this will make it easier to discover areas that need improvement; it will also enable a person to locate important information at tax time or when applying for a loan.
Filing taxes is a requirement for a freelancer, just as it is for a salaried, full-time employee. A freelancer who does not file taxes might be faced with hefty fines or even an audit at a later date, so handling taxes is a necessary aspect of money management. Any person who is making the transition from full-time employee to freelancer may be initially confused by the different requirements to which a freelancer must adhere. According to Artisan Creative blogger Laura Pell, hiring an accountant may be a viable course of action. Once a freelancer has filed taxes once or twice, many details become less confusing and he or she may be able to deal with them without hiring professional help.
Saving money is essential for a freelancer. Whether a person freelances as a photographer, an artist, a writer, a personal assistant or anything else, some months will be leaner than others. Saving money is an optimal way to ensure that expenses will be covered at any time of year. Additionally, a freelancer does not receive a pension or a 401(k) option as an employee might. This means that a freelancer must provide for their own golden years and should open a retirement account and add money to it regularly.
Freelance work can be exciting and rewarding, but a freelancer must exercise some caution in relation to finances. Saving money, paying taxes, and paying bills on time can help a freelancer to avoid financial disaster. According to credit experts, keeping a high credit score is crucial for anyone who hopes to buy a home, purchase a vehicle, or even take a vacation. If an individual has allowed poor financial habits to lower a credit score, getting legal advice from a reputable credit repair service could be necessary. Countless freelancers have found that when they take steps to manage their money and raise their credit scores, they are able to focus on their work instead of worrying about being in debt.