Freelancing has many advantages over an ordinary cubicle job. More often than not, you are the one who is in charge of your working hours. You also get to choose where you work from, and many other things.
But, this sense of freedom comes with one severe potential downside - it is temptingly easy to forget about your financial responsibilities and things you need to do to keep your finances in check. When you also consider the fact that freelancing is the type of work where no one can guarantee you a steady workflow, you will understand why it is important to keep your finances sorted out.
Get yourself an accountant
First of all, be aware that a good accountant can help you with most of the financial issues and inquiries you might have. But, there is even more than that an accountant can do for you.
A good accountant should be your financial advisor. They will provide you with financial advice and discover innovative ways to save money and improve profits.
With some help from a professional accountant, you can automate or altogether remove some repetitive and mundane parts of your workload.
Besides, consider all the everyday work that an accountant deals with - collecting and checking financial data, generating reports, and performing audits, together with preparing financial and tax information - and you will quickly see why you need their services.
Most accounting companies offer a type of deal where you can hire a professional to help you with your finances when you need one. This means that you won’t have to pay for accounting services all year long if that is too big of an expense for you.
For example, you can hire an accountant only during the tax season.
Avoid unnecessary expenses
When you are your boss, it is essential to save money wherever you can while simultaneously not being too strict on yourself.
Finding that balance is hard, but there are a few things that you can do.
For instance, when you get a new car, consider getting a lease instead of buying a new vehicle.
Besides the fact that monthly rates for a car loan are typically lower than those you would pay when outright buying a new car, this idea has several other significant advantages.
For one, as long as you take good care of your vehicle or avoid what is known as “excessive wear and tear,” all the repairs and insurance are usually included in your lease.
Another good thing is that you can simply return the car once your lease is up or sign a new agreement and leave the dealership with a brand new vehicle.
This is an excellent thing for those who always want the newest tech and safety features in their car. Remember, a new car loses half its value the minute you drive it off the lot, so leasing is the prudent thing to do.
Keep your accounts separated
One thing that can be extremely difficult when you have no one to answer to besides yourself is keeping your private life and your business separated. You should do the same with your business account and your personal one.
When you keep them separated, it will be much easier for you to keep track of your transactions, thereby making your small business accounting more accurate and up-to-date.
When the tax season comes, having two separate accounts will make it easier to find the statements and receipts you need. The same is true for all your end-of-the-year bookkeeping needs.
Even in the case of some legal issues, i.e., your business being sued, your personal liability is lower if your accounts are kept separate.
Have an emergency fund ready
As a freelancer, you already know that money comes and goes in hard to predict ways. That is why you should have a well-stocked emergency fund.
There will be times when work will be plentiful, and others when you are making just enough to get by. Sometimes, all your efforts, budgeting, and managing your expenses will not be enough.
To prepare for the rough times coming your way, you should initially have an emergency fund that can last you for at least one month. Later on, you should build that up to three, and finally, six months.
The best way to achieve this is to save money when there is plenty of work and income coming in. Simply create a budget and stick to it, even when you are earning enough for a much more luxurious lifestyle at the moment.
And, speaking of bank accounts, your best course of action would be to keep this emergency fund in a separate savings account, even if it doesn’t pay much interest. What matters is that you can access that money quickly and hassle-free, should you ever need it.
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