5 Critical Personal Finance Tips for Freelancers

A calculator, pen, and financial statement.As a self-employed freelancer, there are quite a few things I wish I knew about personal finance before I got started. You’d think it’s as simple as money coming in and money going out, but it’s not. You have a lot to worry about in terms of business overhead, fees, taxes, and retirement planning. Overlook one step and you could find yourself in a world of trouble – or, at least, really nervous about your future.

Talk about Taxes

Do some research or find someone you can talk to about taxes. Those who are self-employed have to pay both regular income tax and self-employment taxes. Hardly seems fair, right? If you’re selling a tangible product, you also have to worry about filing quarterly sales tax reports. Delays in any of these can end up costing you quite a bit in fees and penalties. Talk to an accountant or financial adviser to make sure you’re saving what you need.

Health Insurance

One of the riskiest moves I made was to go without health insurance as a freelancer. I just can’t afford the high rates. And before you get all high and mighty, I’m not abusing anyone’s systems, either. I pay all of my medical bills – making payment arrangements and scraping by where I have to. I can’t wait for the health insurance exchange to open in October because I’m really curious as to what I’ll end up paying and if coverage will become affordable. Consider your health as you make the leap. Can you get on a spouse’s health insurance plan? Can you afford to pay for your own plan? Can you cover your expenses out-of-pocket?

Retirement Planning

Not working for a corporate business may seem freeing, but it’s sobering to realize how much they’re doing for you – especially in terms of retirement planning and 401(k) plans. Talk to a financial adviser about setting up your own retirement account so you can worry a bit less about your future. Do this sooner, rather than later, so you don’t find yourself stuck on the “work till you die” plan.

Set Up a Consistent Billing System

Do you bill your clients weekly, monthly, or at some other frequency? Make an agreement with each client and stick to it. If you don’t send out your bills on a regular basis, the money won’t come in regularly. The less consistent you are, the less consistent your clients will be. You can’t expect everyone to pay you the second you bill them, either – even online. Make sure you’re billing early enough to not feel pressured as you wait for cash to come back in.

Plan for Slow Periods

This is a place where I still have problems. For example, the months of July and August are painfully slow for me. I have very little work and I feel slightly panicked right now, in September, as things are very, very slowly building back up. This is absolutely no wiggle room in my budget. Having some money set aside will help you through these slower times.

Money can be funny, especially for freelancers. Take care of the critical items – the ones that will cause you major headaches or legal problems later on down the road – and you’ll be on the path towards success. You can find more information here about finances in general; and this site, Smart Asset, is great for asking for advice!

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