Budgeting Tips for a Freelance Business Professional
As a creative, you might yearn for the freelance lifestyle, hoping that you would make heaps of money and have some time for yourself as well. Once you have freelance system in place that works for you, it’s important to take control of every aspect of your freelance business, especially the finances. This article will cover some of the ways in which you can budget and plan ahead in order to be a successful freelance entrepreneur.
Basic Freelance Expenses
The first step in taking control of your finances would be to determine your basic expenses. Your personal and professional expenses might now become somewhat intertwined, so it’s important to keep these factors separate.
As a freelancer, your most obvious expenses would include computer hardware and software, online courses, resources, materials, electricity and telephone bills, outsourcing costs, website hosting, internet bills and money transfers.
Create a Personal and Professional Expenses Budget
Not many people know how to manage their money without the help of a budget. Draw up a personal and professional monthly budget to determine what your general expenses are.
When you are drawing up this budget, also consider medical expenses, insurance, holidays and sick leave.
If you don’t know how to create a budget and stick to it, there are numerous free online tools available to assist you. Have a look at apps such as Mint.com and You Need A Budget.
Also keep a file at hand for every client you have, stipulating your contract agreement and payment expectations. Make a note of which clients tend to not pay on time.
“Track how much money is owed to you from work already completed (accounts receivable) as well as how much money you can expect to receive from projects you complete during the month”. – Design M
Establish a Monthly Salary
As mentioned before, it would be ideal if you could separate your personal and professional expenses. It is also advised to manage the money in separate accounts. Create a ‘business account’ where you will receive your project payments and from that account deposit an established monthly salary into your personal account. This way you might end up with a surplus to be ‘saved’ in your business account that could come in handy.
The extra money could be used in the case of unforeseen expenses, tax payments and even a year-end bonus. Paying yourself as if you are an employee will help you to budget according to a fixed amount instead of overspending some months and barely getting by during other.
Set Your Rates Accordingly
“One reason many freelancers have trouble is that they base the rate they charge their clients on having 40 billable hours a week. Too many freelancers fail financially because they charge too little for their work”. – Vandelay Design
Instead of keeping in mind that many of those hours will be spent on admin, marketing and networking you won’t get the amount that you perceived. Compare what you are charging with other freelance individuals and while keeping your expenses and working hours in mind establish per hour or per project rate.
Get a Personal Accountant on Board
If managing money is not your thing, leave it in the hands of those capable. As a freelancer getting an accountant on board will help you eliminate risks and learn how to work with your money. Your accountant will also be able to tell you how to work out your taxes and have better understanding on the matter.
Spend Wisely, Save Regularly
A big mistake that many freelancers make is that they overspend the months when it’s going good. Reverse this process by either paying yourself a monthly salary as previous mentioned, or put a portion of your income in a savings account.
Consider a Part Time Job
There is no shame in admitting that you are having a few slow months. Think of additional ways in which you can earn an income. You might have more skills and talents other than what you are practicing as a freelancer, use this to your advantage and get a part time job if necessary.
Pride will get you nowhere, so instead of struggling to get by month after month, find a temporary solution to your income problem.
Friends and Favors
As a freelancer, you can really benefit from making other freelance friends within your industry. Since you don’t have colleagues or a boss, you have to establish your own work circle.
As time passes you will realise that this networking is crucial to your business success and there are friendly ‘faces’ online that won’t mind lending you a hand.
Save money by asking your online and freelance friends for favors. Work together to highlight each others’ skills. Feature another freelancer on your blog and in return that graphic designer might offer you a free logo or corporate identity package. Find ways in which you can help others and but don’t expect them to immediately return the favor.
Take the branding and marketing in your own hands: write guest posts to be posted on high traffic blogs and join online conversations to make your presence known.
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