Whether you are an experienced Freelancer or new to the freelancing world, it is important to understand the financial planning and intricacies of freelancing to channelize your resources and recoup great returns on your professional work.
Managing finances is one of the most important yet widely ignored areas. Often, freelancers are so engrossed in their work that they tend to forget about financial planning.
Business finances and management are some of the pivotal components of business planning and freelancing that rule its success.
If you are working as a freelancer, you must have some basic knowledge about business finances and how to manage them wisely.
It will help you to efficaciously manage your freelance income and make the optimum utilization of the resources.
Below are the top 5 finance tips that can help you to manage your finances as a Freelancer:
1. Create a Discrete bank account for your freelancing income:
First and foremost one should open a separate bank account with one of the reliable banks to manage the freelance income. A separate and discreet bank account can help you to keep a check on your incomes as well as expenses.
It is one of the vital finance decisions. As a freelancer whether income or expenses that you incur such as rent, utility bills, salary to employees must be done via this bank account only.
Moreover, a historic view of our past freelance incomes will give you a tentative idea about the past and current monthly revenue.
These detailed finance statements help one to plan the year and make a list of seasonal projects, regular projects, recurring clients, etc. It helps one to maintain financial stability.
2. Create a Budget:
For a freelancer, budgeting may seem like an overwhelming task but it is imperative to form a budget and get a comprehensive overview of income and expenses.
Freelancing work is inconsistent, there are days where you are very much occupied with the projects, work, and clients and certain days where you are free and don't have enough projects at hand.
A simple and accurate spreadsheet consisting of clients, project proximity, billing cycle, etc can help one to keep a regular track of freelance income.
This spreadsheet can also be used to determine the tentative monthly and annual budget taking into consideration daily expenses, incomes, and other overhead costs. Just like an employer, a freelancer must also withhold a certain amount from their monthly earning for tax payments.
One of the best ways to set aside a tax amount is by analyzing last year's tax paid and annual income. Apart from taxation, a freelance must also keep some surplus as an emergency fund to tackle any tricky and unexpected situation.
3. Smart financial planning:
Hard-earned money should be invested with careful planning and agility. A Freelancer must save money for the future by investing in retirement plans, investment plans, insurance plans, and much more.
One should make sure to do comprehensive research and opt for the smart yet safest investment options to recoup great returns on investment. A freelancer must avoid taking the risk and investing money in volatile and unpredictable investment options.
4. Set precise goals:
A foresightedness and intricate planning are must to ensure steady growth and success. As a professional freelancer, you must set some realistic and flexible goals.
The goals should be S.M.A.R.T: specific, measurable, achievable, realistic, and target-oriented. The goals should provide a guideline for the future. It must consist of daily, weekly, monthly and annual milestones.
A freelancer must try the best and unleash potential to the fullest to realize these goals and scale the ladder of success. The goals should be interlinked with financial planning.
The goals must complement your finance schedules. One of the best ways to set your goals is to keep daily track of your finances and make necessary amendments in the approach.
5. Maintain perfect books of accounts:
This is one of the most essential parts of financial planning. Many freelancers do not have time or tend to neglect the importance of book-keeping. However, it is imperative to understand the importance of maintaining transparent books of accounts.
A Freelancer must keep track of all its incomes, expenses, investments, and outstanding. A clear and systematic book of accounts is an asset for any freelancer. It helps one to know its exact finance position and aids one to plan for the future.
A Freelancer can self-maintain account books or hire a professional accountant for the same.
The Key Takeaway
If you are a solopreneur and in the business of freelancing works then, you must try the above-mentioned finance tips to cope with the challenges of freelancer financials and ensure stability. Irrespective of the work volume, Financial planning is a must for all freelancers.