Freelancing is a great way to earn money while working around your personal life. But it’s important to remember that being a freelancer isn’t always easy. You are responsible for everything—from finding work to paying taxes. If you want to make sure you don’t cut short your freelance career, here are some things to avoid.
1. Not Paying Taxes
If you’re self-employed, you must file quarterly tax returns and pay taxes based on your earnings. This includes Social Security and Medicare taxes. Don’t wait until the end of the year to file; you could lose out on deductions and credits. Also, keep track of your expenses to ensure you aren’t overpaying.
2. Skimping On Insurance
As a freelancer, you need insurance to protect yourself against job loss, illness, accidents and other unexpected events. However, many freelancers skip health coverage because they think they won’t use it. In reality, most freelancers do use medical care, especially during times of stress. Make sure you have adequate coverage.
3. Ignoring Retirement Plans
You might think you’ll never retire, but retirement planning is essential. Even though you probably won’t stop working once you reach 65, you still need to save enough money to cover your living costs during retirement. Start saving now.
Using freelancing as if it were a job
A freelancer’s income fluctuates based on how much work she gets. But it doesn’t pay to treat her like a full-time employee. Here are some tips for making sure you keep up with your finances.
Money Comes In Automatically, On Time
If you use a freelance accounting software program, you might find yourself wondering why your money comes in automatically, on time, every month. You don’t want to miss out on payments, do you? The answer lies in the fact that most programs let you set up recurring deposits into your account. This way, you won’t have to worry about remembering to make a payment each month. If you’re worried about missing out on payments, check out our guide to managing your online invoicing.
There Are Many Ways To Handle Cash Flow
Freelancers often struggle with cash flow because there are so many different ways to manage it. Some people prefer to pay themselves biweekly, while others prefer monthly. Others still prefer to take advantage of automatic payroll deductions. And still others prefer to write checks. Whatever method works best for you, just make sure you know what you’re doing. Otherwise, you could end up spending too much money on things you didn’t plan for.
It Pays To Be Prepared For Lean Months
You might think that you’ll always have enough work to cover your expenses during a slow period. However, that isn’t necessarily true. When you’re working on projects that aren’t paying off well, you might find yourself having to cut corners. This can lead to problems down the road, such as missed deadlines. So, even if you’ve been getting steady work lately, you should still budget for lean periods.
Taking freelancing as seriously as a business
Keeping accurate records is crucial if your freelancing business is going to run efficiently and effectively. There are many ways to do it, but here are some basic tips to start off with.
1. Keep Track Of Your Time
The most important thing to remember about keeping track of your time is to make sure you’re doing it consistently. If you’re working on multiple projects at once, try to stick to one method of tracking your time. For example, use a task manager like Trello or Asana to keep tabs on what you’re working on. Or use a timer app like Pomodoro to break down your work into manageable chunks.
2. Use An Expense Tracker
If you’re taking out cash payments for freelance jobs, you’ll need to know how much you’re spending. Many people use apps like Mint or Quickbooks Self Employed to help manage their finances, but there are plenty of free options too. Some examples include Quicken, Xero, and FreshBooks.
3. Use A Project Management App
You might already be familiar with project management tools like Basecamp and Trello, but there are lots of others out there. Try to find something that works best for you. I personally love JIRA because it allows me to easily organize my tasks, assign them to different team members, and follow up on things.
Shoddy Record Keeping
The HMRC says that taxpayers must keep accurate financial records. But many people don’t do a good job keeping track of their finances. And there are plenty of reasons why. For one thing, most people aren’t trained to do it. They just assume that they’ll remember what happened each month.
But even if you’ve been doing fine with record keeping, you might want to take another look at your books. In fact, you should probably start now. If you haven’t done so already, here are some things you need to know about keeping accurate records.
1. Start early. You won’t be able to catch up later. So make sure you begin tracking your finances well ahead of tax time.
2. Make a list. Write down everything you spend every day. Include everything — including your meals, entertainment, clothing purchases, and gifts. This way, you’ll have a complete picture of your expenditures.
3. Don’t forget small items. Even though you may think you always pay attention to smaller purchases, you really shouldn’t. Take out your checkbook and write down everything you buy. Then go over your receipts and add up the total amount spent.
4. Use a software program. There are lots of programs that help you keep track of your finances. Some work online; others require you to use a computer. One popular option is Quicken. Another is Mint.com. Both offer free versions.
5. Know what you owe. When you file your taxes, you’ll need to include all your debts. Before you close out your account, find out exactly what you owe. You can usually find this information on your credit card statement.
Not Setting Rates Correctly
If you’re willing to work for free, great. But remember that you could always ask for more later. And if you’re charging too little, you won’t make enough money to live off of. So it’s best to start out with a price that makes sense for you.
Not Outsourcing Appropriately
Many companies are outsourcing work because they don’t want to pay employees enough money. But there are many things you can outsource that won’t cost you anything. Here are some examples:
1. You can hire someone to help you write articles. If you’re good at writing, why not use your skills to earn extra cash? Many people make money online doing just that.
2. You can hire someone who knows how to code to build an app for your business. This could include apps for your phone or tablet, or even an app for your computer. Apps are great ways to generate revenue without spending too much money.
3. You can hire someone with experience to manage social media accounts for your brand. Social media marketing is one of the best ways to market your brand. Hiring someone to manage your social media accounts might seem like a lot of work, but it doesn’t have to take up a ton of your time.
4. You can find someone to clean your house for you. Cleaning houses is another way to make a little side income. Some people prefer cleaning themselves, while others enjoy helping others clean. Either way, it’s a job that needs to be done.
5. You can hire someone you trust to handle your taxes. Taxes aren’t fun, but hiring professionals to help you makes life easier.
6. You can hire someone trustworthy to run errands for you. Running errands isn’t fun, but having someone else do it saves you time.
Being Unclear About Your Services
Task creep happens when you take up too much work without getting paid. Business owners often find themselves doing work for free because they want to build relationships with potential clients. But being clear about your services will help prevent task creep. If you don’t charge enough money upfront, it’s easy to start working on projects that aren’t aligned with your goals. This leads to frustration and resentment. You might even end up spending hours on something that doesn’t bring in revenue.
Make sure to clearly state your fee structure before starting a project. When you’re charging hourly rates, make sure that your clients understand how many billable hours are included in every price quote. If you’re offering fixed pricing, make sure to include a breakdown of what each part costs.
Frequently Asked Questions
How Working for Yourself May Put Your Health at Risk
Freelance jobs are often portrayed as glamorous and lucrative, but there are some downsides to working independently. A recent survey found that freelancers spend up to 12 hours a day being online, while another study revealed that they experience symptoms like insomnia, depression, anxiety, and stress.
Can you make a good living as a freelancer
Yes! You can make a great living as a freelance writer if you have the right skillset and mindset. I am not saying that you should quit your day job (unless you really want to), but you can definitely earn money online while working full-time.