Managing Finances as a Freelancer: What You Need to Know
Are you a freelancer looking to get your finances in order? If so, you're not alone. Many freelancers struggle with managing their money, but it doesn't have to be a difficult task. With a little organisation and effort, you can get your finances under control. To help make things easier for you, we thought it would be useful to put together a brief article about this subject. If this is something that you’re interested in learning more about, read on as we break down everything you need to know about managing finances as a freelancer.
Separate Your Work and Your Personal Finances
As a freelancer, it is important to keep your work and personal finances separate. This means understanding the value of your time and being comfortable negotiating rates or taking time off. In practical terms, it also helps to have a separate bank account for your business finances. This account can make it easier to keep track of expenses and tax obligations and provides more flexibility in how you manage your money.
Creating a budget for your business expenses can help you track where your money is going and make sure you are not overspending. This is especially important if you are new to freelancing and are still learning how to manage your finances.
Save Your Tax Right Away
As an employee, you don't have to think about taxes because it is automatically deducted from your paycheck. When you're self-employed, you are responsible for your own taxes, and you have to make sure you have the money set aside to pay them. A good way to do this is to open separate savings account for your taxes, so you're not tempted to spend it. You can also get software that will help you estimate how much tax you owe. It's better to over-estimate and have a little extra at the end of the year than to underestimate and owe money.
Create a Budget That Works for You
Budgeting as a freelancer can be difficult because you don't always know when you'll get paid or how much work you'll have in the future. One way to combat this is to create a budget with minimal monthly commitments. This means opting for quarterly utility bills, saving up to pay for car insurance and council tax in advance, and keeping credit card spending to a minimum. Another way to budget as a freelancer is to pay yourself a set monthly amount from your business account to cover all of your main bills. This can take a little while to reach a point where you're able to do this, so be patient with yourself. Finally, you can try to create an emergency fund that can cover you if you enter a slower period of earning. This is a separate pot of money that you only use in case of an emergency.
Work with an Accountant
If you are just starting out as a freelancer, you may not need an accountant. You can keep track of your business finances by yourself. However, if your business starts to get more complex, you may want to consider getting an accountant. An accountant can help you with your taxes and also help you plan for your business's future.
We hope this article proves to be useful when it comes to helping you gain a better understanding of how to best manage your finances as a freelancer. While it may seem daunting at first, the information that we’ve discussed above should make things infinitely easier for you.
If you need help managing your finances, then you’ve come to the right place. 1 to 1 Accountants provides accountancy services for a freelancer so that they don't fall back on taxes and other financial issues. Get in touch with us today to get started.