The personal finance tips every freelancer should know

If you dream of having the flexible schedule of a freelancer, it’s important to remember that this career path requires excellent management of both professional and personal finances. Here are 20 top tips that any freelancer or self-employed worker should put into practice.




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Draw up a budget

This may seem like very basic advice, but all freelancers – in fact, everyone – should draw up a budget, if only to know how much you need to pay your monthly bills and purchase essentials. Lots of experts suggest the 50/20/30 method: 50% of your after-tax income on needs, 20% on savings and debts, and 30% for things you want rather than need.




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Separate your bank accounts

Make it easier to manage finances linked to your work by opening a separate bank account for professional income or any other side hustles, like Uber or Airbnb. Monitoring your professional spending will be easier, and according Nerd Wallet, any audits will be much less painful.




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Set aside money for taxes…in a savings account

Payday for freelancers means party time. It’s easy to forget that part of that payment will be owed in taxes down the line. Freelancers should save the percentage of every payment that will be paid as tax. Why not put your money into a high-interest savings account? That way you’ll earn on your savings while waiting for your tax bill.




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Pay your taxes

Freelancers should also remember that they are responsible for collecting taxes for their services. Chartered Professional Accountants Canada advises that as soon as payment is received, set aside an amount to cover the sales tax that you will be required to pay on a quarterly basis.




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Create a safety net

Delayed payments, slow periods, the loss of a client – downturns can happen for any number of reasons, which is why it’s important to have a safety net. Renegotiating your mortgage to reduce your payments, putting aside money from an additional contract, and revising your budget are all ways to start building up a financial cushion.




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Calculate an emergency fund

Saving for a rainy day is important, but how much should freelancers set aside? Most experts suggest having the equivalent of three to six months of income saved, allowing you to cover basic costs. Some go as far as advising nine, or even 12 months. Of course, the more you can save the better!




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Grow your business

Freelancing is by no means always smooth sailing. The sudden loss of a client risks wreaking havoc on your finances, so it’s important to think about growing your business and periodically investing in attracting new clients. Make sure, however, that this doesn’t diminish the quality of your products or services.




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Get to know your local fiscal system

As a freelancer, some of your spending will be deductible. As Chartered Professional Accountants Canada explains, this usually includes things like office furniture, legal and accounting fees, banking fees, training, and rent. Check government websites to learn what you can rightfully claim according to your provincial, state, and national fiscal systems.




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Review your health requirements

Similarly, freelancers have no prescription insurance. Depending on your health, insurance that covers medication may be essential. The Balance, a financial advice website, suggests different ways to solve this problem, such as joining a professional association that offers its members insurance, taking out private insurance, or obtaining coverage under your partner’s insurance.




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Pay your debts sooner

Regardless of your career choice, it’s never good to have debts hanging over you. Given freelancing’s precarious nature, it’s a good idea to pay off your debts as quickly as possible, particularly those with a high interest rate.




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Look into financial support programs

If you’re just starting out or thinking of going freelance, public and private organizations can offer various financial support programs. Home Business suggests taking some time to learn about your options.




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Insure your possessions and work

All Business proposes that, depending on your type of freelance work, it may be a good idea to take out professional liability insurance. Despite having signed a contract with a client, interpretation differences could lead to a legal dispute that could be expensive without insurance.




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Review your rates

As a general rule, the price of goods and services tends to increase every year, meaning that your business expenses increase as well. While each increase may not be reflected in your rates, it’s still a good idea to periodically review your rates, as recommended by the remote and flexible jobs website, FlexJobs.




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Manage your accounts

As a freelancer, it’s your responsibility to manage your accounts. Make your life easier and get organized right from the get go when paying your taxes. Carefully save and file all invoices and official documents related to your services or company.




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Learn to say no

As Benjamin Franklin said,“Time is money,” and this is especially true for freelancers. Learning how to say no (politely, of course) to bad clients, such as those who are rude, always ask for more without paying fairly, or are disrespectful. Create time, instead, for new, healthier client relationships.




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Invest to earn more

If your workflow is increasing and you’re struggling to find enough hours in the day, it might be time to start delegating certain tasks to an external resource. Hiring someone else to do your accounting or renting a more suitable working space might increase your productivity.




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Consider asking for a deposit

When you become a freelancer, you are in charge of billing clients and getting paid. Otherwise, you simply won’t get paid. One way to ensure payment is to request an initial deposit. This is not always easy or even appropriate, however, for all types of work. To find out whether this could work for your business, the website Business recommends investigating recourse options in the case of non-payment.




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Microsoft and partners may be compensated if you purchase something through recommended links in this article.

Be sensible when it comes to money

As a freelancer or self-employed worker, nothing is guaranteed. According to Money Sense, spending your money wisely is vital. Do not, for example, use your personal money to fund side projects or buy things that you’re not certain you’ll use.




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