Doing freelance work can be one of the biggest career decisions you will ever make. It provides you with flexibility in terms of workload and pace. It gives you an opportunity to meet new people and grow your network. But just like any other career, there are some downsides to it.
You are technically running a business if you are doing freelance work. As such, you need to stop thinking like a regular employee, especially when it comes to money management.
Here is a guide to managing your finances without going bonkers.
Assess Your Fixed Costs
In the early phases of being a freelancer, it is important that you determine all your fixed costs. Doing this will reduce the difficulties that come with budgeting your income monthly. Start with the expenses that are directly related to your job, such as Internet connection, transportation and business cards. Do not forget your food, health insurance, and gym membership.
Set Aside an Emergency Fund
ITP strongly recommends that every freelance worker should set aside an emergency fund. Let’s face it; there are times when the business is not strong. And it pays that you have a fall back during these occasions. As a rule, your emergency should cover at least 4 months’ worth of expenses.
Structure Client’s Payment Schedules
Remember, you have a business. And business has a uniform and consistent payment scheme. Schedule your clients’ payments ahead of the due dates of your bills. To track payments, you may use receipts. Do not forget to draft a foolproof contract.
If you are transitioning from the corporate world to the freelance industry, do not leave your day job yet. This is one of the most practical financial decisions that will save you from financial problems. A freelance business is indeed a great idea, but remember that you have dues to pay. If your enterprise is already thriving, you should work with a professional who will deal with your cash inflow and other concerns, such as personal tax returns.