If you’re a freelancer like me, you know the importance of managing your financial health. With taxes, admin work, and expense fees to juggle, it’s easy to find your financial health confusing over time.
Luckily, this guest post from Jessica from Solopreneur Journal is here to help. She explains the most important things to consider when it comes to your freelancing financial health. The more proactive you can be with your own money, the more prepared you are for the ups and downs of working online.
If you’re working as a freelancer, it’s more important than ever to stay on top of your financial situation. It’s tempting to spend all your time looking for work, and once you find it, doing it.
While you’re working to generate income, it’s easy to let the other end of the equation — how and where you spend, save, and invest your money — languish. But if you don’t stay on top of your outflow, you’re likely to feel even more stressed out, as you work ever harder to keep up with expenses.
Fortunately, there are some things you can do to keep that from happening. Here are just a few of the best ways to manage your financial health on an ongoing basis.
Take Inventory of Where You Stand Now
First, it might seem like a no-brainer to develop a budget, but let’s face it, that’s harder to do when you don’t have a consistent source of income. If you’re making great money one week and not so much the next, it’s easy to throw up your hands and think it’s hopeless to even try to create a budget.
On top of it all, you have to keep track of both your personal and business finances for tax purposes. Fortunately, some apps can help you with this process. Once you’ve separated things out, it will be easier to keep track of all that’s coming in — and where it winds up going.
You may have to make some hard choices, but that’s far better than paying a bigger financial price down the road if you don’t tackle your challenges now. The sooner, the better. To start, make a clear budget. Take into account your current income and expenses, and go from there.
Start Paying Off Your Debts
Next, simplifying things makes it easier to budget. One great way to simplify is to pay off your bills. The fewer places you have to send your money each month, the easier it is to keep track of things — and the less likely you’ll be to let something slip through the cracks. Plus, if you’ve got a lot of debt, you’re probably paying a lot of interest, which is like throwing money away.
Debt consolidation is one option, but be careful you don’t wind up paying even more in interest with a bad deal. If you’re sacrificing hard-earned money for the sake of mere convenience, you might want to think twice. And don’t use debt consolidation as an excuse not to track where your money’s going; That’s a self-defeating proposition.
If you do decide to consolidate, look out for scams. And be careful to avoid future debt, so you don’t wind up back in the same place again. As a freelancer, you can’t afford to have too much debt to worry about long-term.
Take a Proactive Approach
Murphy’s Law is a lot less likely to kick in if you’re proactive. With that in mind, look for ways to avoid financial problems before they happen. Shop around for the best insurance for your needs, whether it’s health insurance (always a concern for freelancers), car insurance, or homeowners insurance.
Balance deductible amounts against premiums. Calculate the likelihood that you’ll need to actually use your insurance — and how much of it you think you’ll need. Read any contract you sign carefully, and make the best deal for yourself.
Practice Preventive Maintenance
Next, preventive maintenance is the best way to minimize risk, whether you’re talking about your body, home, vehicle, or anything else. Physical activity, a good diet, and consistent sleeping patterns can help preserve your health. The last thing you need is to get laid up when you’ve got a big assignment due or a major contract in the works.
In the same way, regular maintenance on your vehicle can keep it running smoothly, not to mention saving you from expensive repair bills and dangerous situations. You can ruin your engine if you don’t get that oil change.
Also, letting your tires go bald can lead to blowouts, which cause 11,000 accidents and 200 deaths a year. So change your oil regularly, and check for factors that can cause problems with your tires, such as worn tread and underinflation. The more proactive you can be in all areas, the fewer surprises you’ll have.
Branch Out with New Skills
Learning new skills as a freelancer is another form of preventive maintenance that can keep you in demand as the market shifts. That’s what happened — and big-time! — with the pandemic, which all but shut down some markets (travel, hospitality, dining out) and boosted others (delivery, online shopping).
Stay ahead of the curve by broadening and diversifying your skill set as you move forward. Whether it’s learning a new computer language, reading floor plans or blueprints, grant writing, or driving a commercial vehicle, pick something you’ll enjoy and that will help you enhance your ability to find work.
Invest Your Resources Wisely
As the saying goes, the more your money works for you, the less you have to work for your money. Salaried employees may have access to opportunities freelancers don’t, like 401(k) plans, so you may have to spend a little more time looking for solid investment opportunities. But it will be worth it in the long run: You’ll probably want to retire someday, too.
These are just some ways you shore up your finances as a freelancer. Instead of avoiding these challenges, tackle them head-on. Once you’ve got a handle on them, you’ll be free to do more on the front end without the stress that can come with worrying about where your money goes. Your financial health is always important, so make sure you prioritize these ideas above.
About the author
My name is Jessica Larson. I’m a married Midwestern mom and a solopreneur. I create online courses for students, and I’ve started and run several other businesses through the years. My goals are to support my family while still actually spending time with them, to act as an entrepreneurial role model for my two daughters, and to share what I’ve learned through The Solopreneur Journal.