Finance for Freelancers

Working as a freelancer is a great way to earn an income on your own terms. As an independent contractor, you have far more say in the work you do and when you do it and that sense of freedom is one of the primary reasons why so many people are turning to freelance work.

Of course, being a freelancer is not all roses, It can be hard to get started when you don’t have much of a portfolio to speak of and you’re relatively unknown, but with time and patience you can get past that. Then, there’s the financial side of things, It’s not always as easy to plan for your financial present and future when you don’t know how much you’ll be working and bringing in from day to day, week to week and month to month.

You shouldn’t let the financial side of things put you off though because, although it might be a little trickier to juggle, you can get and keep your finances in good order. With tha in mind, here are some financial tips that any freelancer should find useful:


Build an Emergency Fund

Ideally, you would have built up an emergency fund before taking the leap into freelancing because it provides a great buffer when work is hard to come by, but if you don’t already have a decent amount of savings behind you, start one as soon as possible. Most experts will say that you should save the equivalent of at least six month’s worth of bills and expenses, so that you’re covered should you find yourself without any work for a period, but don’t panic because you can build that up, putting as much as you can afford into savings, over a period of time. Oh, and once you’ve got that much saved, don’t stop there - the bigger financial buffer you have the more secure you’ll be and the better able you’ll be to turn down work that is too low-paid or which does not appeal to you at all.

Open a Business Account

A lot of freelancers are paid into their personal bank accounts, but this can make their finances rather messy. It is far better to open a separate business account for all work payments, so that you can more easily do your taxes and assess the state of your freelance business. Business accounts can be very cheap these days, so it does not have to be a huge expense for you and it really will make your life a whole lot easier.

Don’t Undercharge

A lot of freelancers do not charge nearly enough when they start out, which means that they end up dipping into their emergency fund or using handy bad credit credit cards early on when there really is no need to do so. The main reason why they do this is because they do not value themselves highly enough and they do not take into account the cost, not only of their time and expertise, but of things like electricity, insurance, their retirement fund, and savings, You might be a freelancer, but you should think of yourself as a business and ensure that you charge enough so that all of your overhead expenses are met.

Consider Hiring an Accountant

It might seem like an unnecessary expense, especially when there is so much affordable accounting software out there to do your accounting for you, but if you can afford it, you should definitely think about getting an accountant. Why? Because accountants are smart and they know the tax laws inside and out, this means they are better placed to identify areas where you can make a saving, that you might not have noticed of known about. An accountant may be expensive, but they really can save you a fortune as a freelancer.

Don’t Put All Your Eggs in One Basket

The first time you get a client who’s paying your relatively well, it can be oh so tempting to not look elsewhere for any additional work because you’re making enough, right? This is almost always a really bad strategy because as a freelancer, your contract could be terminated at any moment when your client says that they no longer need your help or they find someone who will do what you’re doing cheaper, for example. That could leave you in a precarious position with no money coming in for quite some time, whereas if you’ve kept other clients on, even only for a few small contracts, you’ll have something to fall back on and far more references to help you get more work. The more streams of income you have, the better.

Chase Up Payments

One of the biggest financial problems freelancers face are the dreaded non-payers or slow payers. They hire you, expect you to complete your work to a high standard to a strict deadline of their choosing, and they’ll get on your back if they don’t, but when you submit that invoice, do they pay you straight away, NO! They are often very frustrating because they simply do not understand that as a freelancer you do not have the same kind of cash flow as a business and them paying on time or not could mean the difference between you making rent that month or not.

The best way to deal with these individuals is by keeping on their back. Call, them, email them, go to their office frequently until they pay up. If it doesn’t seem like they will, threaten them with a debt collection company. If you do the work, you deserve to be paid and you should do all that you can to make sure that you are.

Being a freelancer has it’s good and bad points, but if you can ensure that your finances are in good order, then it has more benefits than negatives - the freedom it gives you alone is something that is hard to beat in the 9-5 world. So, take charge, work hard, build up that emergency fund, and you’ll do just fine.