2014-04-04 12:35:10 - Keeping up with finances and their budget is very important for any freelancer. They have to control it with more care than others, as they have no regular income. In order to lead a secure life, they have to follow a few financial tips, which can be found right in this article.
Freelancing is known for its financial ups and downs. Some months it might seem like you have enough clients to put you through the entire year without even worrying for a moment. Others might unfortunately see you desperately scrambling for your last dollars to cover rent and food.
The business of you is a difficult one to handle, especially when it comes down to financing. Learning to balance your budget and responsibly spend it is of vital importance. Here are a few basic strategies every freelancer should think about when handling spending and income.
1. Control and Keep Track of your Finances
First and foremost, make sure your finances are never left unchecked. Some freelancers just go with the flow when things are looking
good and don’t think about how much they have and how that relates to their spending. Burying your head in the sand is an extremely bad idea when your finances are concerned. Creative job and free spirit aside, as a freelancer and your own CEO, you have to take full responsibility when it comes down to managing the budget. Here’s how to do it:
2. Make an emergency fund
The easiest way to deal with financial hardship is to be prepared for it. A good general idea is to have a separate fund, which should only be used in case of emergency. Put aside some money each month until you have at least 3 months worth of living expenses stashed away. Most financing experts recommend going up to 6 months. Having that financial cushion will not only make sure you don’t have to resort to loans when times are hard, it will also let your mind work in peace when you run into problems. It’s much easier to focus on getting new clients and trying out various business strategies when you know that you have a stable financial support to back you up.
3. Diversify your income sources
Aiming for several clients is a general thumb of rule that any freelancer should follow. It might be a bad idea to get most of your income from just one main source. Why? It binds you to that particular client, making it harder to refuse requests, negotiate or just back out if you’re no longer happy with the business relationship. Furthermore, if that one client suddenly runs into financial problems of their own or just decides to stop working with you, you might be in big trouble. That’s why you should always try to have at least a couple of different fairly equal income sources which balance themselves out.
4. Don’t forget about taxes
Sooner or later, your taxes will have to be paid. If you’re doing them yearly it can be easy to just neglect them until you get the check. Calculating your average income and putting away the tax percentage will make sure that you won’t get caught off guard. It’s similar to the emergency fund idea, but you have to make sure you don’t mix them up. Taxes are not an emergency, they are a sure expense, so have a separate fund to cover them when the time comes.