Some futurists say that the future of jobs is freelancing. There’s no need to go to work, collaboration can be done online, and the office is basically in the computer. Some may disagree but for Millennials, freelancing seems to be a natural job option. It’s actually becoming more of a preference now than a need. Staying in one job all your life is no longer the trend and so, there is an increasing movement of freelancing individuals who offer work services mostly online. Writers, graphic designers, artists, and IT professionals among many others have found ways to make money through freelancing.
Freelancing has a lot of perks: having a free schedule and working at the comfort of your home are just some. But when it comes to finances, it can be quite a challenge. The most common dilemma for freelancers is when they have to handle their finances. In this kind of work, income is not always stable and predictable. So here are some financial tips or solutions in making sure you won’t fun out funds when you need it most.
Save, save, save!
As the old saying goes, “when it rains, it pours.” So when it comes to freelancers, some months you’ll get really huge amounts of money, some months, you earn a lot less or even nothing if you have no projects in the pipeline. The first solution to this is to save money when you earn big. And do your savings in at least three diversified ways. Save money in your bank account, save money in a piggy bank, and save money in time deposit where it can earn interest. This way, you won’t be tempted to deplete one fund source quickly.
Pay taxes then yourself
Being the law-abiding citizen that you are, paying taxes first is essential as it takes away the worry of having to pay taxes when the internal revenue officer comes to hunt you down. Even when you are employed, taxes are first withheld before you get your net income salary. This should apply as well with you. The first thing you do is deduct the taxable amount from the total amount that you got and then take the salary you have set for yourself.
Earn from your taxes
There is a clever financial solution when it comes to paying your taxes. Since you have the autonomy to handle your own taxation, why not grow your money in a time-based savings account? The interests are higher in time deposit and you won’t have to spend it until tax month arrives. The earnings are not definitely much but hey, money don’t grow on trees right? At the very least, you’re still earning a little from your taxes.
Build an emergency fund
If we follow Suze Orman’s rule of thumb, she says everyone should save up an emergency fund that is equivalent to eight months of your salary. For freelancers this financial tip is essential, as you need to build stability in an unpredictable financial landscape. Actually, it’s no different from a company. The only difference is, there’s a finance department to deal with these issues. Even when you get into a personal loan, it is good to set aside some of the loan money as the key here is to build a buffer fund that can shore up your coffers at the most critical times.
Monitor your own finances
The biggest challenge of a freelancer is having to be your own accountant or finance officer (unless you have the money or resources to pay for an accountant). Technology offers some helpful tools like apps that can help you manage your budget or invoicing systems that will help you create, track, and monitor your flow of cash. Typically, a credit-debit T-chart would you organize your finances. Also take the time to review your financial data and see if you’re spending or saving in the long term.
Hopefully, through these financial tips, it’ll be easier for freelancers to manage their money. Again, not having an employer other than yourself has its amazing perks, but there’s also a huge amount of responsibility that goes with it.