Everyone should be on top of their finances, but it’s doubly important if you are self-employed because of the innate uncertainty that comes with being your own boss. For any freelancers that feel as if their money matters are spiraling out of control, here are some basic tips that should steer you back on course.
Calculate your estimated quarterly tax payments well in advance
The main thing that can disrupt your financial stability as a freelancer is being hit with an unexpectedly hefty tax bill.
Avoiding this is as simple as setting aside enough of your income to cover the amount you’ll owe at the end of each quarter.
Of course you might not know exactly how much you need to save, which is where an estimated tax payments calculator is your best friend.
Using a tool like this will let you quickly establish the likely amount you’ll need to pay the IRS in a few months’ time, rather than needing to rely on guesswork, or do all the mathematical heavy lifting yourself.
Track & deduct expenses
Another important aspect of managing your taxes as a self-employed professional is keeping tabs on the costs your business accumulates. Many expenses can be deducted from your tax bill, which is an efficient way to keep your cash flow in check.
Modern tax software makes expense tracking straightforward, so remember to look out for the tools targeted at freelancers and small business owners. Also be rigorous in terms of which expenses you claim, since mistakes can be made if you are new to being self-employed.
Build a budget
As mentioned, financial instability seems like it is part and parcel of the self-employed landscape, at least if you are new to the game. However, in reality, people who make a success of their freelance career are those who take money management seriously from day one.
This is where budgeting is a brilliant solution, as it lets you look into your incomings and outgoings, and use what you find to determine how to use the money you earn.
The shape of your budget will depend on your circumstances, but the simple process of spending less than you make and setting aside cash for emergencies, rather than spending all of your disposable income, should apply to everyone.
Get ready for retirement
Just as working for a business means that your tax affairs are taken care of, it’s easy to forget that full time employees can also benefit from employer-sponsored pension plans and other retirement-oriented perks.
Self-employed people are again expected to deal with this themselves, and again it is best to be preparing for your retirement as soon as possible.
There is plenty of flexibility in terms of how you go about this, but setting up a private pension plan on top of any savings and investments you make is wise. Getting expert advice from a financial advisor should also stand you in good stead.
For anyone who is self-employed, insurance can give you that financial safety net you need when calamity comes calling.
Aside from any business insurance that could apply depending on the type of work you do and the industry you occupy, you might also consider getting income protection cover. This is a policy which will let you make a claim if you are unable to work because of an illness or a disability that you suffer further down the line.
There is a price to pay for all kinds of insurance, but if financial stability is something you are eager to achieve, then it could be worth it.