10 Core Financial Tips for Freelancers

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As a freelancer, you are on your own when it comes to keeping track of your finances. And let’s face it, the financial side of things are generally the last thing we want to mess with at the end of a day. As painful as it might be to some, we all have to take our financial future into our own hands.

This doesn’t have to be as time-consuming or frustrating as you may expect, however. A little planning can go a long way. Let’s take a deep breath and look at sure-fire ways to get the most out of your finances.


It’s difficult to manage your finances without measuring them first. While your income may be up and down, your bills are generally pretty well fixed month-to-month. Create a budget for the upcoming calendar year and break it down into monthly segments.

Keep your budget as low as possible, in case your income dips lower than predicted, or an unforeseen cost occurs.

Keep your budget as low as possible, in case your income dips lower than predicted, or an unforeseen cost occurs. Err on the side of excess and overestimate the amount you will owe the government. This way at the end of the tax year you can avoid owing more than expected.

Here is a tip for determining what to cut from your expenses. Rank your costs, starting with your fundamental necessities and ending with your least important costs. This will allow you to cut where it hurts the least.

Health Insurance

Health Insurance should be high on your list, even though it can be a large expense.

If your spouse works full time and can include you on his or her insurance plan, then switch over to reduce your overhead costs. If this isn’t an option, search the insurance market for a good deal if possible.

In a matter of days, medical expenses can bring you from financially healthy to bankrupt, so be sure to have health insurance in place as soon as possible. It’s essential for a freelancer.


Save your money to budget for unforeseen costs, emergencies, and the inevitable tax season. Put aside an amount of your paycheck to compensate for any unplanned costs.

If you haven’t started freelancing, or at least not in a full time capacity, save as much money as possible to pay your bills consistently for at least a couple of months. This will help reduce pressure on yourself and allow you to focus on your work.


Staying out of debt is extremely important. Proactively work toward reducing costs in all areas of your life. Some examples include committing to a lower rental policy, reducing utility costs, spending less on groceries, or even eating out less. Understand your credit card policy and only use your credit cards if you have a plan to make payments and pay it off in the near future.

Business expenses are inevitable. You may realize that you need the latest version of the Adobe Creative Suite and a credit card is the only way to get the software right away. These are normal costs of doing business. If expenses exceed $1,000, consider going to your local bank and applying for a business loan. The interest rates are generally a fraction of what a credit card can offer.

Set Income Goals

Establish a system of goals that will reasonably challenge yourself to increase profit margins over time. Consider the frequency of your goals and set them as either monthly, quarterly, or annually. The more aggressive your goals are the better chance of success you will have within your freelancing endeavors. While being aggressive with your goals is critical, keep it within a realistic scope to avoid burning yourself out or creating something you will not be able to maintain over time.

Pay Yourself Regularly

Paying yourself on a consistent basis may be one of the biggest challenges for freelancers. With income fluctuating, it can be difficult to drain the freelance business account to pay yourself. On the other hand, some people pay themselves too much after a few large checks come in. It’s much better to set a consistent payment.

Since your income is not consistent, take your previous year’s income and divide it by twelve.

If you have a strong quarter or year, pay yourself a bonus that you can use for a specific purpose. That’s fine. But what you don’t want to create is a month-to-month variable income — one month it’s great and the next month you’re running on fumes.

Since your income is not consistent, take your previous year’s income and divide it by twelve. This should give you an understanding of what your monthly income budget should look like. Keep your business funds and personal income separate though by setting up different bank accounts for each. Consider setting up an account specifically for your estimated taxes.

Retirement Investment

Create a plan for your retirement now. Investing in your retirement plan early will provide you with more options in the future. This prepares you for the time in your life where you don’t want to work anymore or simply can’t.

Since freelancing is often something that can be done from home, many believe that they can simply work into their twilight years. It’s better to plan and save now, than to find yourself in a situation where you don’t have a the money you need, and limited options.

Create an Invoicing System

Keeping track of your invoices is sometimes a daunting task for freelancers. Many different options exist to streamline this process. Hiring an accountant is the most ideal situation. In some cases, paying an accountant will lead to a reduction in overhead costs and wasted resources. If your budget doesn’t allow for this luxury, then turn to web apps or accounting software.

Maintain a Healthy Lifestyle

While this may not seem finance related, your personal health is symbiotically connected to the health of your freelancing career. Healthy eating and regular exercise will keep you mentally and physically fit. This will increase your work performance and deter the possibility of sickness. Take 30 minutes a day and go for a walk or hit the gym. Be sure to maintain this regularly. This will get you away from the computer and let your mind re-center itself.

Reflect on the Past

After your first year in business, contemplate the goals you set for yourself. Were there any mistakes that you don’t want to repeat in the future? What unforeseen costs occurred? Looking back, could you have saved money in certain areas? After reviewing, set new goals for the future.

Photo credit: Some rights reserved by gunnar3000.

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