Getting a permanent job at a company and growing a career along with that company used to be one of the surest ways to achieve long-term professional stability and success, but that’s no longer the case. These days, many people the world over build successful careers as freelancers and business owners. The freedom and flexibility associated with being part of the gig economy are often touted as some of the foremost reasons many people choose it over full-time employment.
However, while self-employment unquestionably has many benefits, it does also require freelancers and entrepreneurs to master multiple skills that ordinary employees typically don’t have to. Financial management is one of the most important of these skills, and it’s also one of the most challenging. If you choose to work for yourself, you’ll need to handle your business and personal expenses, taxes, contracts, insurance, and other financial matters on your own—all on top of keeping up with your regular workload.
While managing your money as an entrepreneur or freelance worker is no mean feat, a strategic approach can make it much easier. These 4 essential tips can help you stay on top of your finances and build a fruitful business:
Work with a Dependable Bank
Finding a trustworthy partner financial institution to work with can significantly ease the stress of day-to-day financial management for the self-employed. A good bank will go the extra mile to protect both your hard-earned funds and your sensitive personal information. Choosing a bank that specifically caters to small businesses can also help you get access to specialized advice, financial tools, and digital solutions to suit your unique needs.
In this increasingly interconnected age, finding a bank that employs a robust digital banking platform is critical. What you want is a partner institution that will make it easy for you to pay bills, receive payments, take out loans, and perform other essential financial transactions anytime, anywhere. Guaranteed access to efficient, round-the-clock digital banking will not only help you conserve time and energy for work, but it can also take your business operations to the next level.
Create Realistic Budgets
Learning how to live within a practical budget is an essential part of adult life, but it’s definitely much simpler to do if you have a consistent paycheck to look forward to every few weeks. Budgeting for freelancers is generally more complicated, as your cash flow is likely to be unpredictable. You’ll need to learn how to fit your expenses comfortably within your income, especially because you’ll have both personal and professional financial obligations to fulfill.
To start, it’s probably best to list out your essential personal and business expenses separately. The first list will probably include things like rent, utilities, internet, car payments, groceries, and other everyday essentials. The second list, meanwhile, may feature things like travel expenses and software subscription fees. Once you've written them out, these lists should give you a clear idea of how much funds you need to make in order to cover them all.
Finding budgeting tools that work for you also goes a long way toward making the process easier. If you’re more traditional-minded, you can definitely calculate and track your expenses with good old pen and paper. However, you may also find it helpful to shop around among the plethora of budgeting apps and other tools available today. Whether you’re looking for a free solution with basic budgeting functions or something more comprehensive, there’s bound to be a tool out there that fits your needs and personal style.
Have Multiple Sources of Income
One way you can get around the problem of inconsistent cash flow as a freelancer or entrepreneur is to diversify your sources of income. Depending on only a small pool of clients for work means that you’ll be left in the lurch if those clients suddenly end their engagement with you. If you have money coming in from a wide variety of places, on the other hand, your cash flow will be more stable and you’ll feel the impact of losing single work opportunities much less.
Diversifying your income streams necessitates being extra proactive about acquiring new clients and customers. Some methods you can explore as a freelancer include writing pitch letters to prospective clients and joining referral networks. If you’re a business owner, also consider leveraging the power of social media to promote your enterprise and expand your customer base.
Plan for Taxes
Being self-employed means you’ll have to plan for and pay your own taxes instead of having the company you work for deduct them from your salary automatically. Make a habit of planning throughout the year instead of just around tax time so your tax liabilities don’t catch you off guard. For instance, regularly setting aside around 30% of one’s total income for various types of taxes is a workable approach for many. You’ll also want to calendar quarterly tax deadlines so you never miss a payment.
It's also important to be aware of the tax-deductible business expenses you incur throughout the year, which can lower your tax liability and help you save money. Luckily, most of the spending you do in pursuit of income should be tax deductible. Prominent examples of such expenses include any business-related equipment and supplies, travel expenses, advertising and marketing costs, and more.
If you’re self-employed, then effective personal finance practices will be essential for building a successful career that can sustain you comfortably for years to come. Good financial management will not only help you earn more steady income but also enable you to maximize your earnings.
