Before I start this post, please note I’m not an accountant or financial planner, and the information included in this post is about my personal approach to managing my freelance finances as a freelancer. Freelance income can be strange or confusing for some. It is not like a regular, salary job. I wanted to include write a post on how I organize my finances as it seems to go hand-in-hand with pricing.
Keep Personal and Business Accounts Separate
The first time I started to take money for freelance work, I created a separate bank account and credit card for my business income and expenses. These different accounts make tax time very easy. I only really need to focus on my “business” accounts for taxes. If you are a blogger or have a part-time business, I can’t emphasize this enough. It will make it incredibly easy for you to understand and manage the success of your business financially.
Use Accounting Software
I’ve mentioned it a few times on this blog, but Quickbooks for Self-Employed has changed my life. I use to spend time each week and input each income and expense into a spreadsheet where I’d tag it according to the tax categories. Quickbooks has saved me so much time. It does cost a monthly fee, but that fee is well worth it. Plus, I’m able to see what I owe in taxes quarterly and yearly.
Freelance Work is Taxed
This statement might sound very obvious, but I’m always surprised to read how many people don’t account for this when it comes time to taxes in March/April. For me, I’ve told myself that 30% of each project goes to taxes. With each new project I get, I put 30% into a savings account.
Pay Yourself Regularly
Some people might differ on this approach, but it has worked for me. I pay myself every two weeks a fixed income. I live off of relatively “fixed” expenses (personal and business). It has allowed me to save up a reserve just in case of a slow-time. By paying myself regularly, I’ve given myself some normalcy to my personal income stream. I can actually plan for larger purchases and also give myself a raise!