How I Manage My Finances as a Freelancer
Managing finances as a freelancer can feel like stepping into uncharted territory, especially if you’re coming from a traditional job where taxes are withheld, and benefits are handled for you. When I first started freelancing, I wasn’t fully prepared for the financial side of things. Over time, though, I found some simple practices that helped me get organized, plan for taxes, and budget effectively. While I’m not a financial expert, these are strategies that have worked well for me, and I hope they might be helpful for you, too. Of course, I always recommend doing your own research or consulting a financial professional as needed.
Let’s dive into my approach to freelance finances!
1. Separate Your Accounts
When I first started freelancing, keeping my personal and business finances together led to a lot of confusion. Every time I got paid, I’d have to track back through my personal spending to figure out my actual freelance earnings. If you’re serious about freelancing, setting up separate bank accounts for your freelance income and expenses is one of the best moves you can make.
Why This Helps:
Separating your accounts lets you clearly see what’s coming in and going out. It keeps your personal spending out of the equation and helps you track business expenses more accurately, making it easier to see how your freelancing is growing over time.
How to Get Started:
You don’t need a complex setup to make this work. Simply open a separate checking account for your freelance income, and another if you want to separate out savings for taxes or business expenses. You’ll have a clean view of your earnings, making tax season a lot less stressful!
2. Use Budgeting Tools to Track Income, Expenses, and Savings
Budgeting tools can be a freelancer’s best friend. They help you keep track of expenses, calculate income, and set aside money for taxes, insurance, and savings. Freelancing income can fluctuate month to month, so having a clear budget lets you see where your money is going and helps you plan for leaner months.
Here’s a breakdown of what I track with my budget:
Expenses: Regular costs like software subscriptions, internet bills, and any equipment I buy for work.
Taxes: I estimate my taxes each month and set aside a percentage of my income in a separate savings account so I’m ready when tax time rolls around.
Insurance: If you’re freelancing full-time, health insurance becomes a key monthly expense.
Savings: I make it a goal to save a certain percentage of my freelance income. This goes into an emergency fund or retirement savings.
Tools I Use:
There are plenty of budgeting apps and tools out there, but I’m a bit old school. Personally, I use a simple spreadsheet with my own formulas to track income, expenses, and savings. It may not be as fancy as the latest apps, but it gives me complete control and keeps things clear and straightforward. By customizing my spreadsheet, I can focus on exactly what I need, from tracking business expenses to setting aside funds for taxes—all without the extra features I don’t need.
Tip: As you budget, remember to set aside extra for lean months. Freelance work can ebb and flow, so having a cushion ready can make slower periods feel less stressful.
3. Identify Your Seasonal Spending Trends
After freelancing for a while, I noticed that certain times of the year tend to come with extra expenses. For example, I tend to spend more around the holidays, on birthdays, or when I plan for a summer getaway. Knowing these patterns in advance helps me set aside a little extra in the months leading up to these times, so I don’t have to dip into my savings or scramble to cover expenses.
How This Helps:
By tracking your spending trends, you can start saving in advance for those high-spending months. When you’re aware of your seasonal expenses, you’ll feel more in control and prepared when the time comes.
How to Get Started:
Look back over the past year and identify when you tend to spend more. Is it around holidays? Family birthdays? Vacations? Once you’ve pinpointed these trends, set a goal to save a little extra in the months leading up to these periods.
Example: I know I like to travel in July, so I start setting aside a bit each month from March onward. By the time summer arrives, I have a small travel fund ready to go, and it doesn’t impact my budget.
4. Involve an Accountant if You Feel Overwhelmed
Freelance finances can be overwhelming, and it’s easy to feel lost in the world of taxes, deductions, and financial planning. This is where an accountant can be a real lifesaver. While it might feel like an added expense, a good accountant can help you navigate the ins and outs of self-employment taxes, organize your deductions, and even find savings you might have missed.
Why It’s Worth It:
If you’re feeling stressed about managing finances, an accountant can help you get clarity, minimize your tax burden, and ensure that everything is done correctly. Many freelancers work with an accountant quarterly or annually, but you could even just consult with one initially to get your questions answered.
How to Find One:
Ask for recommendations from other freelancers, or search for accountants who specialize in self-employment and freelance finances. Even a one-time consultation can be incredibly valuable.
Managing finances as a freelancer isn’t always straightforward, but with a few strategies, you can build a system that works for you. Separating accounts, tracking income and expenses, and identifying seasonal spending trends are simple steps that help you stay organized, avoid stress, and even save more for the future.
Remember, everyone’s financial situation is different, and what works for one freelancer might not be ideal for another. Take the time to find what works best for you and adjust as your freelancing journey evolves. And don’t be afraid to seek help when you need it—whether it’s a budgeting tool or the support of a knowledgeable accountant.
Here’s to taking control of your freelance finances and building a thriving, fulfilling career.
Warmly,
Lala
