Whether you're freelancing for a handful of clients on the side or looking to make the jump to freelance full time, we know it can be stressful and even a bit scary at times - especially when it comes to finances.
When you're experiencing the rush of signing your first few contract, organizing your finances is probably the last thing on your mind.
It's crucial, however, to have a financial plan at the outset so that come tax season, and the inevitable peaks and valleys of life as an entrepreneur, you're prepared.
Here are 5 finance tips you should know before you kick off your freelance career.
5 Finance Tips Every Freelancer Should Know
1) Know Your Worth
Always keep your worth and integrity at the forefront of your mind when pitching to a potential new client.
"What? You're charging that much?" will without question be a conversation you'll be faced with early on. Although you may feel like you'd do anything to gain new business at the beginning, it is important to remember the value and quality of yourself and your work.
When trying to navigate a tough discussion like this, take an educational approach and try to explain how your service will benefit the potential client and their business. If they still feel that your services are overpriced or too expensive, they're probably not the right fit anyway.
2) Invest in Yourself
This doesn't mean heading out and leasing a brand new Ferrari or buying yourself a Rolex. What it does mean, though, is to ask yourself: "What investments will help me grow my business?"
- Account for accounting: Hiring an accountant is imperative for anyone doing contract work. Finding a CPA, understanding their rates, and putting money aside throughout the year is an excellent way to make sure that you're running your business properly (and legally). Although it may seem like a daunting expense, it will pay off come tax time and save you tons of money in the end.
- Look the part: Consider setting aside a bit of extra cash and purchasing some high-quality staple pieces to add to your business wardrobe. A well-polished and professional look will make an immediate impression and increase your chances of both earning new business, and receiving referrals. Whether you're looking for something more fun, or a bit more laid back, there are many different brands that offer whatever look you're going for.
- Hire a professional: So, maybe you've got the skills to offer an amazing service that you know will add tons of value to other business owners, but you have no idea where to start when it comes to the logistics of business. Instead of spending all of your time trying to nail down new processes and train yourself on everything outside of your zone of genius, knowing when to hire a business consultant will save you tons of time and eventually result in revenue for your business.
3) Open a Separate Account
Keeping your finances separate when freelancing keeps your expenses organized and will alleviate the headache that you'd otherwise experience once it comes time to hand your statements over to your accountant.
Having an account that you use to spend money on all things related to your business will make it easy to know what items can and should be written off as a business expense. This is just a small sample of the expenses you need to keep track of:
- rent, if you work from home
- cell phone
- coffee meetings
- networking group membership,
- office supplies
- work-related travel
Having a separate account will eliminate tons of hours on the back end so you don't have to dig through every time you swiped your card to see what was for business and what was personal.
4) Make Sure to Save
Saving may seem overwhelming at first, but it should be non-negotiable. As a freelancer, you never know when the economy will shift, your computer will break, or your largest client will have a change in budget, and in those moments, you will be thankful for your savings account that you've been contributing to consistently (and just because you're a freelancer doesn't mean a solo 401k isn't an option).
Many mobile banking apps have a "recurring deposit" feature so that you have the ability to choose how much you'd like to put away and when. Other applications like Acorns are an excellent way to mindlessly save here and there in addition to larger, consistent deposits.
5) Educate Yourself
Staying up to date on the latest trends in your industry is key to ensuring your freelance business's ongoing success.
But in addition to educating yourself about your line of business, make sure you also educate yourself on best business practices and finances to ensure that you're always paying yourself first and earning what you're worth.
Knowing best practices and rules when it comes to finances as a freelancer is one of the first and most important things you should do before getting started. Where to spend your money, what types of expenses are acceptable "write-offs," and the best ways to invest in yourself and your business will propel you forward, keep you prepared, and help you combat any issues that may arise.