Being well organized and having good time-management and self-starter skills can help you better succeed at freelancing. It can also be beneficial for freelancers to have good money-management skills. In most cases, freelance workers don’t make a set regular income or get paid every two weeks like many traditional employees. Instead, they often have varying workloads throughout the year. Because of this, income may fluctuate, and payments may be sporadic.
As a freelance writer, I’ve had to make an effort to improve my money management habits over the years. Being a freelancer has been a constant learning experience. My biggest personal finance tip for other freelancers is to automate tax savings.
By doing this, I’ve been able to lessen my stress and feel more comfortable about my finances. Even when my workload is low, I know that I have the tax money I need already set aside. Keep reading to learn more and to see how doing this may help you.
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Freelancers should automate tax savings
As a freelance worker, you’re responsible for setting aside and paying your own taxes. If you don’t do this, no one else will. If you don’t make quarterly tax payments and instead pay on April 15, you could be hit with penalty fees. Plus, if you haven’t been saving all year, it can be extremely stressful having to pay a large sum of money all at once.
In the past, I didn’t automate my tax savings. Because of this, there were times where I had to come up with a lot of money within only a few weeks to pay my taxes in full. This put a significant strain on me. Once I started automating my tax savings, it made my life a lot easier and improved my professional and personal life.
It’s a good idea to open a separate savings account for your tax savings. You’ll be less tempted to touch the funds, and the money will be there when you need to submit a payment. If you’re ready to open a new savings account, take a look at our list of best online savings accounts.
Next, automate your savings. Calculate how much money you’ll need for each quarter, then set up automatic withdrawals. You can choose how often the money is transferred from your checking account to your savings account. For me, it works best to set up weekly withdrawals. This way, it feels like a more manageable chunk of money.
Important money management tips for freelancers
There are steps you can take to set yourself up for better financial success as a freelancer. Here are some key money management tips:
- Know the minimum income you need to make. Since your freelance income can fluctuate throughout the year, knowing how much you need to pay all of your bills each month is a must. This way, during the months where your workload is smaller, you can have a goal to make sure all of your expenses are covered.
- Set a budget. Setting and following a budget is a great way to put your money to good use and minimize unnecessary spending. If you’re not sure where to begin, this guide will show you how to start budgeting for the first time. If you prefer a tech-friendly solution to budgeting, you might consider using a budgeting app.
- Diversify your business. Consider working on different types of projects and with a mix of clients. If work slows down with one client or one project, you still have income opportunities available. Diversifying your workload can also help keep you more interested and excited about your work.
As a freelancer, it pays to have your finances in order. If you’re looking for additional tips or need help with your money management, check out these helpful personal finance resources.