How to manage your finances as a freelancer
Working for yourself is like a dream come true for many and with over £4 million people working as freelancers in the UK, it is a dream that many have made into a reality. There is no doubt that working as freelancer is exciting, but it also highly challenging – especially where money is concerned. Challenging but perfectly do-able. If you have started working as a freelancer or you are considering doing this, it is important to take control of your finances. These are some ways to manage your finances when working as a freelancer.
Keep an emergency fund
Work is really never guaranteed when you work as a freelancer. You could have loads of work one month and nothing the next, so it is important to be prepared. The particularly difficult months seem to be around Christmas, when most businesses shut down and if you are not prepared for this, it can cause a lot of stress. This is why it is so important to keep an emergency fund, so you can cope with difficult periods. If you have already started working as a freelancer, it is time to start putting money away. If you are just about to take a leap into the freelancer world, keep this in mind as you get started.
Charge your worth
When you are first starting up as a freelancer, it can be tempting to charge really low costs – just so that you get the work. However, you need to think about the other costs you are incurring, which your employer would usually cover. You need to pay tax, you’ll want to have some savings, a pension and also some cash to cover your holidays, as you need to make sure you take these – for the sake of your own sanity! With these in mind, make sure you charge the right fee – don’t undersell yourself.
Separate business account
It is a good idea to keep two separate accounts – one for your own personal use and one for your business. You can set up a standing order to pay yourself a set amount each month and keep the rest in your business account. This makes it much easier to do your taxes and it’s just a better, more organised way of managing your business.
Build a range of clients
Even if you get regular work from a specific client, you should never rely on this solely. If you do – it is just the same as working for an employer. You never know what might happen, so don’t put your eggs in one basket. Instead, make sure you get involved in different projects and build a range of clients. With the nature of freelance work, you never know when projects will end, so the more clients you have – the better. It is also important to keep learning and building your skills – so you can diversify your workload.
Manage your accounts
It is important to manage your accounts effectively – not just for the purposes of your tax returns, but also so you can manage your budget better. You need to know exactly how much you have coming in and what you have going out your account – otherwise you may quite easily find yourself in debt. There are lots of accounts packages for freelancers or if you don’t fancy doing it yourself, it may be worth enlisting the support of a professional.
Don’t be afraid to seek advice from professionals or other freelancers regarding the financial aspects of working for yourself. You’ll probably find that many others have experienced the exact same issues as you and knowing you have support can be hugely beneficial. There are all sorts of financial issues which can arise when freelancing and it is important to know what these are and how to ensure you don’t make the same mistakes.
Be great at what you do
If you want to be successful and manage your finances right as a freelancer, you need to be great at what you do. It’s not just about being skillful in your art, but also being reliable and good at communicating with your clients. If you build strong relationships with clients, you can guarantee that they will come to you again and this means your financial situation will greatly improve in the process.