When you first become a freelancer, bookkeeping doesn’t feature high on the agenda of things to worry about. You’re more concerned about finding new clients, providing the service or product you promised, and taking their money when you’ve finished! Handling your finances is an integral part of being a freelancer, however. You need to know how to keep records, balance your books and keep to a budget. Being able to manage your finances correctly can be a make or break scenario for your business. There are numerous benefits of being a freelancer, but you do need to pay close attention to your finances. Below are five practical tips you need to know to get your finances in order once and for all.
1. Track Your Income
It’s important to know how much money you’ve got coming in. Being a freelancer can be unpredictable when it comes to an income. Many use this excuse for not managing their money correctly. Do you know how much you earned last month? Is it going to be the same amount this month? If you keep a record of what you’re earning,it will make it easier for youto budget and prepare for any slow times of the year. If you’ve got a separate bank account for your business, you’ll be able to track your income without too much trouble.
2. Set Aside Funds for Taxes
As the famous saying goes, “There are two things you can’t avoid, death and taxes.” You have to pay the taxman, so you might as well set aside funds every month to cover your tax bill! When you work for a company, your taxes are taken out of your paycheck before you get to see it. This is good because you know what you’ve got left to spend. When you’re a freelancer,however, the onus is on you to pay your taxes every year. Rather than waiting until the end of the tax year, it’s far better to budget for taxes as you go. For example, deposit 10%, 15%, or 20% of your income into a separate account. You don’t have to do it manually; an automated order can be set up every month.
3. Create a Budget
A budget will help you plan out your monthly business income and expenses. You’ll be able to see what you’re spending your money on and plan what you can and can’t do with your business. Using a budget will help you know where you'reover and under spending. If you find you’re regularly spending more than you’re bringing in, there are several ways you can cut your expenditure.
4. Check Your Credit Report Regularly
Most people don’t think about their credit score until it comes to applying for a loan or credit card. Many people choose not to check because they believe it will affect their scoring. Provided you use a credit scoring service, checking will not have any impact.
It’s crucial to check your credit report yearly for several reasons. To begin with, it’s good to know where your credit stands. If your score is bad, there are things you can do about it. If your credit score is good, you can focus on maintaining it. It can take months, even years to build up a good credit history. There’s little point in trying to improve your credit score when you’re about to apply for a loan.
Another reason to check your credit score is to ensure the information contained in it is accurate and correct. If your score is lower than you expected, you can take it up with the relevant credit bureau. how to Dispute Your TransUnion Credit Report in 2018 (Proven Tips), to find out more information.
Every year, you’re entitled to one free credit report from each of the three credit bureaus.If it’s been more than a year since you checked yours last, it’s time to get in touch and order one.
5. Keep Personal and Business Funds Separate
It makes managing your money much simpler if you’ve got separate bank accounts for personal and business funds. Take advantage of online banking services,and you’ll be able to track both of them quickly. Having separate accounts will also make it easier if you want to be sure you’re not living beyond your means. When you’re just starting out, your income is going to be variable, so look for a bank that offers services for free.
Running your own business can be exciting. Being a freelancer means you can work from home, or anywhere in the world, potentially. Thousands of people are already doing it very successfully,and it’s never too late to give it a go.