Whether it’s the holidays or tax time, spending money or saving it, managing money is an important part of the modern lifestyle. For those who earn a living doing freelance work managing money can be that much more difficult as you plan for tax time, try to build a cushion of cash for low work times and so forth. Following are five tips that can help you make the best use of your freelance money and accomplish all your personal goals:
5 Safe Money Management Tips for Freelancers
Organize your personal and work funds separately.
One mistake that many people who do freelance, consulting work, or own their own small business make is that they mix up their personal money and their work money. Always keep freelancing money separate from other funds in your financial world (like a full time or part time job). One great strategy is to pay yourself a paycheck. Have one bank account that you use only for business expenses and business income. Pay yourself a paycheck out of this account; only then can this money be used to buy personal items.
Be careful about your taxes.
The previously bullet point about keeping work money separate will go a long way towards helping you come tax time. One of the biggest efforts that freelancers go through is collecting receipts and itemizing expenses at tax time. If you keep all your receipts in one place, and do all your business spending and receiving through a single account, tax time will be much easier. Of course, you will want to consult an experienced tax advisor to ensure that you are both getting all the tax breaks that you deserve, yet not making any mistakes that could set you up for an audit or extra tax costs in the future.
Invest in safe sectors like structured settlements, annuities or metals.
For the freelancer, it is important that you invest money for the future to secure your retirement and to get you through dry spells at work. While stocks can be exciting investments, opt to put a chunk of your hard earned cash into something secure such as buying structured settlements, annuities, or even purchase of precious metals.
Always try to avoid fees or debt.
Ben Franklin once said that a penny saved is a penny earned; when you save money it is the same as making money. Freelancers can get very busy and it can be easy to overlook things such as paying bills. Strive to pay your bills on time and avoid late fees and over the limit fees. Also, try to live on cash so that you avoid debt and interest. Finally, be sure to send clients their invoices on time; you want the money in your account earning interesting, not theirs.
Conduct a monthly review of savings and spending.
A budget is important for every person, but it is also important to evaluate your savings and spending each month. Check to ensure that you are meeting your goals, look for places to cut your expenses, and constantly keep focused on what you hope to achieve, which is likely financial freedom and retirement security.
And here is a bonus tip, particularly for those new to the world of freelancing or who have problems with time management: managing your money well requires that you manage your time well.
Time is Money!
As a freelancer, every minute of your time holds monetary value. You know how fast you work and how much you charge, so you could probably easily figure out exactly how much your time is worth, minute by minute: use this information. Plan out how you want to spend your time; for example, if you find yourself drifting around the internet, when you should be writing, remind yourself that this diversion is actually costing you money. Looking to buy some new item and spending hours researching just the best price? Remember that while extra research may save you a few dollars on that coveted item, it comes at its own cost: your time. Spending hours trying to fix that headlight that went out on your car? Consider if your time would be better spent writing and then just paying a mechanic to fix the light.
Look for time wasters in your life and put a stop to them. Doing so will free up more time for you to work and earn more money, or help you get your work done faster so that you can get to more important things, like spending time with family and friends or indulging in hobbies.
In summary, putting your money in just the right place is an important way to secure your future. It is imperative that you organize your work and personal funds separately, that you understand basic tax laws that pertain to you, that you make sound investments, avoid debt and fees, and review your spending habits regularly. But it is also important that you remember that your time is money, and that you work to develop good time management strategies.