As a freelancer you don’t have the benefit of a regular pay packet like in a normal 9-5 job and it’s definitely one of the areas of concern for people moving from regular employment and into full time freelancing work.
Financial planning for freelancers is essential.
Get professional tax advice
The very first step that you should be taking is finding an appropriate accountant to make sure that your structure as far as taxation is the right one as there are numerous different ways that you can operate as a freelancer and come end of financial year tax time, selecting the wrong option can leave you with a sizable debt that probably hadn’t been budgeted for. Do this for the same reason other people hire you – taxation and legal structure is complex, get it right by hiring a professional.
Set up separate bank accounts
Separation of Business and Personal bank accounts is another must do. When you’re working with clients it’s easy to make the mistake of seeing business income as personal income but that’s simply not the case. After all, you’ve got both business expenses as well as personal ones.
You also need to set yourself a budget as you enter each financial year of what you anticipate your incomings will be and remember, conservative estimates are always better because if you set your budget based on where you’d like your business to be during those twelve months you run a very big risk of having a cash flow shortfall during the year, and being unable to pay your bills.
Save for rainy days
Another must have is to ensure that you’ve always got emergency savings put aside just in case the amount of incoming business you’re getting goes through an extended slow period, especially over times such as Christmas and New Year where a lot of businesses shut down.
Invest in your health
I also wanted to quickly touch on something that most people don’t think about when they decide to do freelancing to earn a living and that’s your health. One of the downsides to freelancing is that if you don’t work, you simply don’t get paid. If you don’t take good care of yourself it can firstly impact how much you earn, but as a flow on effect can also cause you to miss deadlines.
To sum up
Financial planning for freelancers is often overlooked because it seems daunting and unfamiliar to most of us. But there are some simple steps you can take when you set out that aren’t difficult or expensive which will set you up well for the future.
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