Not having a boss, managing your own work hours and working from home are some of the biggest perks when it comes to being a freelancer or startup entrepreneur. But, having enough money in your bank at the end of the month can be a struggle, and many people struggle when it comes to managing freelance finances. If this is the case then getting yourself in order can be an important first step – or quick catch up – in your freelancing career.
With that in mind, how can you make sure that your bank balance in the black every month as a freelancer?
Funds. It’s a simple concept, but a backup plan just in case a payment or two fall through is absolutely necessary as a freelancer. You cannot always rely on your clients, so it’s important to make sure you have some money tucked away for a rainy day.
For added benefit, you should also open up a business account to keep some money in. This is important for taxes and other business expenses. As, after all, you don’t want to accidentally spend your tax payments!
One of the worst problems for any freelancers wallet is the non-paying client. It’s a headache no matter if it happens during a period of feast or famine, so making sure you take the steps to get paid is extremely important.
There are plenty of free or cheap invoicing and financing software out there, which happily sends reminders for late payments so you don’t have to. So, if you are struggling with this aspect of your freelancing career then getting a software to do it for you could be a simple solution. Software such as Wave and Due are easy to use and free, making it a no-brainer!
Rule of Three Incomes
Unless you are in traditional employment you should never rely on one income stream, and even if you are full time employed it’s not always a good idea. If you have one client that you rely on each month to pay you, then one late payment, non-payment or canceling could put your whole freelancing empire in distress unnecessarily.
So, the best option is to always have more than one stream of income. Whether this is something outside of your typical freelancing efforts or multiple clients, the important thing is to have money coming from a number of different sources each month.
Cut Down Unnecessary Spending
You are in line at your favorite chain coffee shop. Your eyes gaze woefully up and down the list of syrups, wondering how a shot of hazelnut can seriously raise the price to such an extent. Can you really afford this nutty coffee goodness? More importantly, do you need it?
Probably not. Being a freelancer, at least at the beginning and in times of famine, is learning how to cut expenses in sensible ways. Artisan coffee may be one of the cuts that can hurt your heart but benefit your wallet greatly.
Sometimes clients can become unhappy, or you can be clapped with an unfair copyright claim. Unfortunately, it does happen. When it does it could leave you financially bankrupt if you choose to deal with it out of your own pocket. To save yourself from this fate and potentially having to re-enter the traditional workforce, you should invest in freelancer insurance.
For a small fee each month you can have a policy which pays out your legal fees in the case of copyright or negligence suits. Leaving you with the peace of mind to continue with your work and keep earning money as a freelancer. So, investing in freelancer insurance or professional indemnity insurance can be the best thing you ever do to help keep on top of your freelance finances.
Don’t Accumulate Loans
Credit cards and loans while good short terms solutions can be terrible for you in the long term. Especially if, as a freelancer, you aren’t sure where your money is coming from each month. The best idea is to avoid them as much as possible, but if you must get one then make sure it is as minimal as possible.
Monthly repayments take away from your freelancing earnings each month. Earning enough money to cover loan repayments, rent and other expenses can be a stressful weight to put on your own shoulders. Try and make your financial burdens as minimal as possible for a much more peaceful freelancing career.
Overall, keeping on top of your freelance finances isn’t impossible. It does, however, take a little self-control on your part and some forward planning. Yet, if you keep on track before you know it you will have a healthy amount of savings for this inevitable rainy days.
Making your career as a freelancer that much less stressful and making your Mondays’ fun again.