8 Rules to Manage Your Finances as a Freelancer

A freelancer’s income is not particularly predictable since it depends on so many factors like the amount of projects, service costs, current competition and even personal interaction with clients. That’s why a proper understanding of how to manage money on freelance is a powerful factor in success and psychological and financial stability of a freelancing professional.

EasyStaff Head of SMM Gulya Sabirova shares 8 simple rules for freelance finance management in our new article. She had been freelancing for 5 years along with holding a corporate position prior to joining EasyBusy.

Rule #1: Budgeting

It is important to set long-term financial goals and draw up plans to achieve them. It can be saving money for a future pension or planning a major purchase or investing.

A crucial step in this direction is planning your budget overall. You may plan your spending on food, health, tax and any loans you may have. You also need to take into consideration irregular spendings, such as entertainment or an unexpected expense. Budgeting allows you to understand how much you need to earn to cover all expenses. It is good to keep track of how much is spent and earned monthly and to compare the numbers.

Rule #2: Open a bank account

It is recommended to open a bank account specifically for your freelancing income. It helps to keep track of all income and expenses related to your side-hustle and ultimately better manage taxes.

Today being self-employed is the new normal. Naturally, banks, that are the primary treasuries of people today, have already coined several solutions for the younger workforce who combine multiple jobs to earn more. So the chances are the moment you decide to look for some spicy offers from your local banks, you will get overwhelmed with the amount of solutions available today.

Sometimes though, especially if you work with clients from abroad, you may be inclined to use payment services like PayPal to manage your freelance income. However, such payment services normally don’t offer closing documents. Yet they may be very important to your clients if they are companies. To be able to work with companies, you may want to consider EasyStart. It is a freelance management platform that helps its users receive and send payments anywhere in the world. Closing documents for each party are generated automatically, and they are fully compliant with local tax requirements.
Having some money stashed away is a secure strategy to stay afloat even if clients are not found fast.

Rule #3: Creating a Reserve Fund

When freelancing, income may not always be stable. This is why it is important to set some money aside as a reserve fund. You can save some money monthly to cover unexpected expenses. These savings will get you through times when there are less orders or projects than usual or if you happen to be out of work for some time.

Rule #4: Tax Planning

An important part of being a freelancer is their personal responsibility for tax payment. Before you start budgeting, you may want to figure out exactly what tax and how much of it you are supposed to pay. Also, you want to meet all the deadlines for tax payment and document submission, if necessary.

Rule #5: Look for regular clients (the more, the better)

No need to limit yourself to a single client, however regular they may seem. Your income sources must be diverse to make up for income fluctuations and to let you receive as much professional experience as possible. So being present on different freelance platforms is an effective way to stay visible across multiple audiences.

It is important to keep track of your success not only in a bank app, but also in your public accounts. For that reason, you want to stay active in online platforms where clients normally look for freelancers:

  • PeoplePerHour, Works, Working Not Working, Fiverr, Upwork
  • Behance, Dribble (primarily for creative professionals)
  • Linkedin
  • Habr Freelance Platform
  • Word of mouth works for renowned specialists who get recommended a lot

Rule #6: Education

It is important to invest in your education. Developing new skills and learning about new technologies will help you gain a competitive edge over the rest of competition. If your knowledge develops with time, your services grow in price and value. On the Internet, there are so many schools and courses today that allow people to bring their skills up a notch. Likewise, traditional offline schools (master and bachelor programs worldwide) serve the same purpose. What’s more, there are some companies that run workshops and courses for free. Keeping an eye out for exclusive content is a must if you want to stay ahead of your competitors.

Rule #7: Insurance

Some employers cover up their employees' health insurance. The perks sometimes include partial coverage of medical expenses. It varies by country, but the overall tendency is that employees are better protected than individual contractors, including freelancers. So this demographic is particularly vulnerable, and it is important to build insurance savings to support yourself in case of medical misfortunes.

Rule #8: It is OK to say ‘no’.

Most of the time freelancers combine multiple projects and talk to several clients at the same time. At the onset, this is a necessary mode of work because freelancers need to gain experience to ensure their income in future. Yet if you tend to accept any order, you risk getting burnt out or overloaded with work. There is nothing wrong with saying ‘no' to boring projects that are far outside your scope.

Besides, it is the quality of work that plays a major role in a freelancer’s good reputation. If a contractor commits to more work they can actually do, results will not stand up to quality expectations and deadlines might be missed. Refusing projects that are likely to take up more time and effort than is available, freelancers can successfully keep their reputation spotless across the community.

Striking a balance between your time and the amount of work is paramount. Although freelance is a great opportunity to be flexible and free, it also puts a person at risk of getting overworked. If you say ‘no' to excessive amounts of work, you keep work-life balance and prevent burnouts.

Any freelancer goes through a time when they only work for minimal amounts of time or are only available for most urgent tasks. This happens for various reasons, like a family emergency, child birth or health problems. Sometimes it is acceptable to pause a relationship even with your long-term clients to come back with more energy and fully ready than to keep working running on fumes alone.
These rules of finance management for freelancers help you stay safe in times of crises or uncertainty.
As a rule, freelancers focus on a particular field. So it is only natural to refuse projects that don’t belong in their area of expertise. By rejecting them, freelancers focus on tasks they are truly good at and are able to work on more expensive projects. Ultimately, this precise expertise is what moves a freelancer’s wages up. For instance, a single SEO professional doesn’t need to be a copywriter or a designer at the same time. Likewise, a teacher who primarily educates adults doesn’t need to teach children. Last but not least, some tasks just are not worth it. Some might think they are betraying themselves by agreeing to complete a task. Then saying ‘no' is absolutely necessary — and far better than silencing one’s conscience.

Additionally, saying ‘no' or refusing to work on a new project is part of a healthy relationship with a client. In honest and professional communication, there is always space for refusals. It is an important skill that helps freelancers effectively manage their careers and achieve success at work.

In spite of stereotypes, any freelance work requires increased responsibility and rigid discipline when it comes to finances. Following these rules, you will be able to manage your finances more effectively. With time, you will see how your money matters stabilize and your overall wealth improves.
Pay remote teams and freelancers worldwide in any currency