Working as a freelancer means that there is no way of telling that there will be uniformity in the money that comes to you. You may be a brilliant and well-established freelancer but still cannot be sure of the income and expenditure graph. This makes management of personal finance all the more important.
Financial management is a skill which needs to be developed to ensure that you effectively manage the money you have. It is more than just savings; it encompasses a world of rational decisions on money and activities involving money. For a freelancer, financial management could end up saving him from insolvency.
We have got this covered in this article just for our fellow readers. Here you will find your own guide to the management of personal finances. Here are a few tips to ensure that you manage your money smartly.
1. Always Begin With A Budget
You cannot start halfway when it comes to finance management. You must always start with a budget. Pick up your notebook, create a spreadsheet, or use an app and estimate a budget.
To create a reasonable budget, you need to consider a number of factors which affect your finances. These factors include monthly bills, personal expenditure, transportation expenditure, savings, and others. If the amount of work keeps changing, then keep a certain sum of money as savings.
While deciding on a budget, do not be too strict or liberal. You must be reasonable with what you can spend and save every month. If the rate with which work changes is high, then you can consider creating weekly or biweekly budgets.
2. Save For Exigencies
Freelancing is mired with ups and downs, and hence, you can never be over-prepared for exigencies.
Ask any freelancer about this, and he will tell you that the spells of good pay and bad pay can be so frequent that you become desperate to keep work coming. Keep a percent of your income in a separate account only to be used to in emergencies.
3. Do not Forget About Taxes
You cannot absolutely forget about taxes while conducting financial management. Most employees get their salaries after taxes have been deducted at source, but freelancers are usually responsible for paying taxes at the end of every year.
Since tax slabs are different in different countries, you should find out the tax slab within which your income falls. Accordingly, arrive at a definite percent which should be deposited every month. This sum would be then paid out as taxes to the government.
Waiting until the end without saving for taxes would cause a great financial burden on you. Hence, separate taxes from income as soon as the latter gets credited in your account.
4. Plan For Retirement
One of the areas where you must focus on is retirement. Now, if you are a young freelancer this may not be of immediate concern, but you cannot be so sure of what happens in future. You cannot have after-retirement plans without saving some sum.
It is recommended that you open a retirement account, deposit a certain sum regularly, and do not use the money so deposited on anything else.
5. Use Authentic Payment mechanisms
You should sign up on mainstream freelance websites which allow for mandatory deposits from clients when they award work to freelancers. Websites such as freelancer, guru, and others provide these features.
Upfront payment helps in a number of ways: willingness to deposit shows that the client will pay in the future, and in case the client runs away, the freelancer will not be left with tears. Moreover, once money has been deposited, you can expect the client to be more involved in the work process.
Such deposits help you balance your accounts considerably and protect you from shocks which often arise due to non-payment, especially when work is bulky.
6. Download Apps
This is the 21st century with its grand scale technological innovation, and you can expect software developers to come out with a range of highly sophisticated apps. We are going to recommend you a few of these apps which can be of great use.
- Budget Making and handling
There are several apps which help freelancers to create and manage budgets of varied kinds. Some of these apps include the following:
- Goodbudget: It is a budget management app with a solid reputation among freelancers. Whatever transactions you conduct are synced with the cloud. It saves transactions as old as five years in its database. You can share information stored on this app on multiple devices.
- Toshi Finance: The app targets small business owners and offers plentiful creative features to meet your accounting needs. It monitors expenses, classifies budgets, generatesspreadsheets and Google Docs, and others. You can generate a detailed assessment of your financial management anytime you want.
- Mint: This apps tracks all your bank-related transactions, allows putting up reminders, and automatic payment of bills. In addition, it offers recommendations on how to smartly invest your money.
- Wally: It is a free app that offers all those income and expense tracking features which finance management apps provide. In addition, it has enabled support for foreign currencies, providing much-needed assistance in the case of international transactions.
- Invoice Generation
- Freshbooks: It is said to be the most well-known apps for invoicing. With the help of this app, you can quite conveniently create an invoice within 30 seconds. Moreover, it will make sure your clients remember to pay you by sending out reminders.
- And Co: Another amazing app, And Co allows you to send out reminders for invoicing to clients. It generates invoices within 20 seconds, tracks time spend on projects, creates sheets and even tracks expenses.
- FunctionFox: With FunctionFox, invoicing becomes a piece of cake. It will schedule milestones, provide calendar view, allows easy addition of projects, and comparative analysis of budgets.
- InvoicePlane: It is an amazing app, but what makes it more amazing is the fact that it is totally free. You can do all basic invoice generation activities smartly through this app.
7. Track Where Money Is Going
Making a budget, recording income and expenses and all are good—but they are not sufficient for financial management. For successfully managing your personal finances, you must be aware of areas where you are shelling the most and the least; focus on the latter the most.
One tip: always keep a track on small amounts which are spent frequently. We might not find them burdensome on our finances, but they can become. So, keep a watch!
8. Engage In More Projects
It is always better to engage in more than one project. One of the greatest advantages of freelancing is flexibility, and you can use this flexibility to accommodate more projects in your day.
Moreover, you should try venturing into new fields. For that, of course, you will need skills to develop and nurture, and hence, it is recommended that you enroll in courses. You can avail a few really good courses online and you can check them out here.
Diversification will ensure that work keeps coming from all quarters and reduces the chances of low or no pay.
9. Make A Gift
Financial management is a healthy exercise: it should make you mentally and physically healthy and satisfied. Hence, a gift to yourself is not a bad idea.
Freelancing can be really intense, and we often end up forgetting to reward ourselves for all the hard work we put in almost every day. Out of the money you expend, save some for a gift which you give yourself as a reward.
Keep yourself happy, spend money on people who and things which matter, and you will be able to spend money wisely.
10. Get Professional Advice
You can go on reading tips from all over the Internet, but there may still be practical problems. Financial management is a world of activities which are monitored every day to keep yourself floated financially. Hence, there is nothing wrong in seeking professional assistance on this.
You can find these professionals online on many freelance websites. You can hire them, have them prepare a routine to manage personal finance and relax a little. And, yes, one very important thing: follow the plan which the coach has given you!
For a freelancer, money is a tricky business. If your career shots up, money keeps coming; but there will still be moments when you might feel that incoming money is less or insufficient. The entire freelancing community knows that they must plan ahead to ensure that they avert financial crises.
Management of personal finances requires more than just determination; your determination must reflect in the decisions you take. In this article, our aim is to guide fellow freelancers on how to manage their personal finances in an intelligent manner.
If you think that we have covered it all or want to give any suggestion, give us your feedback. You can also share our article with the world so that more people engage in informative discourses on the freelancing world.