Over the past two years, more Americans have become freelance workers. This part of the workforce contributed $1.3 trillion to the U.S. economy in 2021. Their work continues to keep the country running.
Freelancing comes with its advantages, but there’s one issue most freelancers face. Handling finances can be a challenge. Freelancers need to know how to manage money to be successful.
Read on to learn how to manage your money as a freelancer.
Separate Personal and Business Finances
One of the first things you should do when managing money as a freelancer is to separate your finances. Keep your personal and business finances apart. This allows you to track your income and expenses with more ease.
It also allows you to keep cleaner records. Come tax time, this is a plus as you can identify the business expenses you can deduct.
Create and Follow a Budget
As a freelance worker, you know inconsistencies in income are the norm. For this reason, you must create and stick to a budget. Since no two months can result in the same income, base your budget on an average monthly income.
Focus on tracking your business expenses, so you can cover them. This includes work materials and the internet bill.
Keep in mind that if you work with a freelance marketplace, you may need to pay fees. You’ll have to subtract the fees from your income.
The good news is that there are ways to avoid these types of fees. Visit freeup.net to learn how to avoid them.
Creating a budget doesn’t have to be hard. You can use one of the best money management apps available to create one. This way, all your finances can be found in one place.
Set Money Aside for Taxes
There are different types of freelancers, but all have one thing in common. All freelancers must pay taxes. When Uncle Sam comes knocking, you must have money set aside to pay taxes.
You’ll have to make estimated quarterly tax payments. Have your paperwork ready. Don’t wait until the deadline to file, as it can lead to penalties.
Set Aside Money in an Emergency Fund
Unexpected things can happen in life. It’s wise to prepare for an emergency by setting aside money in an emergency fund.
Having one can protect you and your finances. Make it a priority to set aside a percentage of your income. It’s a good idea to have enough saved to cover six months of expenses.
How To Manage Money as a Freelancer
Money management is key when working as a freelancer. You need to know how to manage money so you can cover your expenses and build your savings. It also helps you when it’s time to file taxes.
If you can effectively do this, you can be a successful freelancer. Make it a priority to organize your finances.
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