There are amazing benefits to being a freelancer such as being your own boss, working from home and managing your own work hours. But at the same time, you are very dependent on yourself for a wage at the end of every month.
Therefore, you must know how to properly manage your finances as a freelancer. This, of course, is for obvious reasons.
Managing finances especially cash flow as a new freelancer can be difficult for some people. If you find this to be the case, then this article is for you.
1. Create a business plan
This is just for personal use. You don’t have to design a business plan that you can sell to others.
Having a business plan helps you look at your future and current goals. You also get to have all your finances down on paper to look at. This will help you find any issues or areas to exploit for better productivity.
When you have a business plan as a freelancer, it’ll help you avoid cutting corners or skipping over anything. It will remind you of future goals. Your business plan will serve as your guide in achieving your goals.
2. Financial backup plan
Sometimes as a freelancer, a client may let you down. This can have a heavy impact on your financial situation if it occurs a few times in a month.
When you have funds saved up for emergency situations, it will reduce your stress and help resume your focus in times of need.
A good tip is to create a business bank account for expensive and tax-related payments. Keeping your account separate will help you see the amount that needs to be saved each month for payments and personal use.
3. Use client invoices to manage your finances
Having steps in place to receive client payments is essential for your freelance business. It is easy to lose track of who has or hasn’t paid you for your services.
Regardless of whether this occurs during good or bad periods, financially keeping up with it will benefit your bank account.
Invoicing and finance software is available to everyone and can be bought for low prices and even for free. So, having it is the obvious choice rather than making notes that can be misplaced.
4. Multiple incomes
When working for a company, relying on one income is risk-free and easy. As a freelancer, this isn’t the case.
As mentioned before, clients can let you down occasionally. Therefore, you should never rely on one income from a large client because if that disappears you are left stuck and panicking.
A rule of three is the safest bet, as three clients are unlikely to let you down simultaneously. An additional tip would be to have a stable part-time job as a reliable source of income.
5. Cut costs
Being a new freelancer is not easy. There are times you will need to say “no”.
Sitting in a coffee shop for several hours might help you focus but paying high prices for small coffees might not be appropriate starting up.
Having the latest technology such as a modern and sophisticated laptop isn’t essential either. When starting up, buying something that is fit for purpose will help you keep costs down and out of debt.
Clients can turn sour at times and you could be unlucky enough to be accused of copying other people’s works as a freelancer. Sadly this can occur in some freelancing jobs such as writing.
Trying to deal with unfortunate situations personally can impact your bank account dangerously.
Investing in freelance insurance should be a must to protect yourself. You can choose what you want to be protected for also for different prices.
When you choose to have professional indemnity insurance or covering your personal work, some items are suggested to help protect your personal business from ruin.
7. Avoid multiple loans
When doing this, you should avoid becoming dependent on loans as it can cause complacency and you can lose track of profit and loss.
Cutting cost everywhere else and paying off loans as quickly as possible is advised to help your business grow rather than creating unmanageable debts for your business.
8. Speak up
This is not the only advise around. There might be a reason you went into a freelance business.
Meet with friends or family. Ask for their advice on helping your startup. They’ll probably have a big list of dos and don’ts that will enlighten you as you progress in your chosen field.
Using the internet is always a good idea. Ask questions on communal sites and have a discussion or debate about what you do to weigh up your own pros and cons.
Although a lot of unexpected situations can occur as a freelancer, this article will hopefully help you minimize any problems that may happen.
Being your own boss is about having a fulfilling career that you can completely manage time and work-wise. So, adding financial stress to it will just add unhappiness to your daily life.
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Richard Meadow is a writer that works on topics in relation to freelancing, indemnity and small business advice. He is always interested in new subjects and articles to read about and enjoys writing about them.