Financial Management Skills Every Freelancer Needs To Know
A lot of freedom comes with being a freelancer given that you get a chance to become your own boss. Even so, this comes at a price considering that you will never gain from employer benefits. There is additionally the added risk of having unpredictable income meaning that you run the risk of sinking into heavy debt. In this article, we take a look at financial management tips every freelancer needs to know.
The need to track finances cannot be overemphasized. Monitoring of income revenue within a given time frame is a prudent thing to do. Unfortunately, a lot of freelancers seem to have no idea of the amount they make monthly. Having a record of your finances by your side helps you avoid running broke given that you will be amply prepared for high and low season. You can actually use a 457 calculator to help you remain more organized.
When exploring the world of freelancing, it is important to always work with budgets. This is actually doable despite many freelancers thinking that it isn’t. After you have received payment, it is always a good idea to buy necessities and then pay off bad debts to avoid interest building up. It is along the same lines that it becomes important to save for retirement to avoid trouble in your old age. You also need to save for emergencies but ensure that you replenish the amount should you withdraw.
As you had probably guessed, you need to set aside an amount for taxes. Truth be told, taxes can be tricky to handle more so when you are a freelancer. Having an employer means that he/she takes care of tax matters but in this case, it is solely your duty. Calculation of your annual earnings is essential, though you can still use last year returns as reference in case you do not know the amount you’ve earned. Keep in mind that there are tax regulations for freelancers and it would be good to learn more about them.
According to research, a considerable percentage of freelancers lack insurance. This is definitely something dangerous as the person is likely to have fiscal distress if they got afflicted by a medical condition. There are several options offered by government not to mention you can also opt for private insurance. Experts say that you will have no issues paying for medical insurance if you were to have a medical savings account.
It’s a wise idea to confirm whether the amount you’re receiving is proportionate to services you’re offering. Start by finding out the rates your fellow freelancers are charging. Revising your rates upwards is advised in case your rates happen to be low.