Many people often experience some challenges in managing their finances, especially small business operators. If you are in the freelancing business, you should stay on top of all your expenses and know where the money is going. There are different measures that you can take to maintain clean records of all your expenses. Read on to learn how to properly manage your finances as a freelancer.
Separate Your Business From Personal Account
Freelancing is business, therefore the first thing that you should do is to separate your personal account from a business account. This will make it easier to handle your bookkeeping since you will not experience any problems when it comes to tax preparation. Open an account that you can use to funnel your income from freelancing. The other one should be specifically for your funds to avoid confusion. Make sure you choose a bank with minimum charges to save your money. It is a great idea to open an account with a bank that charges zero deposits and low monthly costs.
Use Special Application To Track Expenses
Recording all your receipts manually can be daunting, especially when you have a busy schedule in your freelancing work. However, you can reduce this burden by getting a receipt app that records all your expenses and taxes. You may think that these apps have the common purpose to simply keep track of your expenditures, however, the content of this link explains that as an independent contractor, you will need an app that is designed to make your life as a freelancer easy in many ways. Find an app that offers invoices, templates, and everything you need as a freelancer to track your expenses.
Receipt apps, in particular, offer many benefits and help you to stay on top of every situation. For instance, the app helps you to manage your taxes correctly to avoid penalties. When you do your taxes manually, the chances of errors are high and this often leads to penalties. Working as a freelancer means that you are always busy. Therefore, the receipt scanner can perform all financial management tasks for you. The device is portable, and you can also use it on the go.
Create A Budget For Your Business
A budget for your business is a smart way for managing your finances. It helps you plan all the monthly income and expenses at the beginning of every month. As a freelancer, you can consider the zero budget technique to handle your income. This technique helps you to prepare for the money that you expect to get that month. It also helps you to keep the expenses low. When you document all the expenses, you will have a clear picture of where your money is going. You will also be able to see if you are overspending so that you can make necessary adjustments to your budget. With a realistic budget, you will be able to spend less than you earn.
Set Money For Savings
As a freelancer, you should know that you have no monthly fixed income as a result of limited work at times. Some clients pay late, and this can affect your finances. Therefore, you should save some money in case you experience late payment issues or lack of work. When you get a big paycheck, do not be tempted to spend all the money on one goal. Save some funds after taxes and expenses. The main advantage of savings is that they protect your business when there is reduced workflow.
Reserve Money For Taxes
Depending on the country where you live, you may be required to pay taxes when you operate as a freelancer. It is a good idea to talk to a tax professional first to get insight into the tax requirements for freelancers. In the US, taxes should be paid at the end of every quarter. Therefore, you must aim to set aside at least 30% of your earnings though it does not necessarily mean that it is the amount you will pay. It is better to have more savings since you can use the money for other purposes. Your tax is determined by your earnings when you operate as a freelancer.
Freelancing is exciting since it gives you financial independence, and you can schedule your work to suit your needs. However, the only downside of freelancing is that it does not offer fixed income. In some cases, you may deal with clients who pay late or experience reduced volumes of work. Therefore, you need to manage your finances properly to avoid a situation where you may end up facing cash flow problems. The tips above can go a long way in helping you manage your money wisely.