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Business Finance Business Planning Personal Finance Freelancing is growing in popularity, additional income how to organize in part to the amount of freedom it offers. As a freelancer, you have the flexibility to pick and choose which projects to work on, when to work, what to charge, and of course, the convenience of working from home. While freelancing certainly has its pros, finances can often prove a challenge for new and seasoned freelancers.
Unlike a traditional job, freelancers do not receive a steady paycheck or employer paid benefits. The somewhat unpredictable nature of freelancing requires you to manage your money very attentively.
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Separate Personal and Business Finances Separating your freelancing finances from your personal finances is key. By having separate accounts, you can more easily track your income and expenses, as well as have cleaner records to clearly showcase what business expenses you can deduct on your tax return.
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Since freelancers do not have a regular income and do not pay their taxes in the traditional sense, it is imperative to keep detailed records of your finances. Separating your business finances from your personal finances is the first step to ensuring that you are keeping as good of records as possible.
Create and Follow a Budget Due to inconsistencies in income, creating and following a budget can be a challenge for freelancers, but it is not impossible.
Since no two months result in the same income for a freelancer, you will have to base your idea of earnings on an average additional income how to organize income. When you calculate your average monthly income, you can then have a better idea of what to budget.
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Remember when budgeting to keep a record of all business receipts and to track all business expenses. It is up to you as a freelancer to estimate your taxes every quarter. To stick to your financial plan it is essential to diligently track your income and expenses throughout the additional income how to organize.
Pay Yourself First This advice seems to be a consensus among financial experts — pay yourself first.
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Making sure you get a cut of your earnings might seem logical, but many freelancers find paying themselves to be particularly challenging. As a business owner, paying everyone before you pay yourself may seem like the most responsible thing to do. But refusing to prioritize payment to yourself can also bring serious personal financial consequences. In addition, paying yourself first will help simplify your budget and reduce stress related to your finances.
Have Money Set Aside in an Emergency Fund As a freelancer, your income is subject to regular ebbs and flows, making an emergency fund even more of a priority. An emergency fund can be used for any sudden, unexpected expenses, such as medical bills or car repairs.
Because your income as a freelancer is not completely predictable, an emergency fund can protect you and your finances. Ideally, you should have enough saved to cover six months of expenses regardless of your financial situation.
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Save for Retirement Since freelancers are working for themselves, it may be tempting to forgo enrolling in a retirement plan. But saving for retirement is necessary for everyone, and luckily, freelancers have plenty of options. For instance, you can contribute to an individual retirement account IRA or solo additional income how to organize.
Continue to Pay Off Debt In a way, freelancers face more uncertainty about their future income. Instead, they like to save their money where it is easily accessible in the event that their business hits a rough financial patch.
If you have personal big money is made simple, do not forget to set debt repayment goals.
- According to CNN25 million American households are living paycheck to paycheck.
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Though you may feel as though you have more pressing priorities as a freelancer and business owner, it is vital to continue paying down your debt.
Paying off debt will decrease your interest payments, help raise your credit score, and allow you to then put the money you were paying to debt towards your business. Failure to obtain insurance can put you and your family at medical and financial risk.
- In essence, you can do most of the work upfront and put some additional effort along the way to earn an income.
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This includes health, life, car, and any business insurance you may need. Set Money Aside for Taxes Taxes can be stressful for anyone, and unfortunately, freelancing taxes can be even more complex. Because freelancers have to pay taxes every quarter, it is necessary for them to set aside some of their earnings to make tax payments.
One easy way to ensure you have money set aside for taxes is to create two separate business savings accounts. One account is where you can deposit money received for your freelancing services.
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Then, you can take a percentage of your earnings out and move it to the second account to act as an estimated quarterly tax account. Plan for Ups and Downs As a freelancer, you likely earn drastically different amounts from month to month.
Even freelancers who earn a high income every year can attest that there are slower months in their business. To be a successful business owner, it is integral to accept that not-so-good months will happen and to plan accordingly by creating a budget, building an emergency fund, and planning for taxes.
Have Confidence in Your Finances When you are a freelancer and business owner, your finances will never be predictable or steady. Despite the inconsistencies, it is possible to take charge of your finances and build wealth. With wise money moves, prioritization of saving money, and responsible business practices, you can master your money as a freelancer. It is then that you can truly enjoy all the benefits of freelancing.