How to Organize Finances as a Freelancer: The Ultimate Guide
A 2014 study found that about 34 percent of the total workforce in the U.S. were independent workers. That study predicted that number to increase by 50 percent by 2020. Another study projected that freelancers will be a majority by 2027.
If you’re currently a freelance worker, you know you aren’t alone. But it can still be difficult to navigate the issues that come with freelancing. Many workers struggle with how to organize finances.
From paying taxes to estimating monthly income, freelancers face unique challenges. If you’re looking for some guidance, you’re in the right place. Read on for our tips on organizing finances as a freelance worker.
How to Track and Project Your Income
One of the scariest parts of freelancing is not being able to predict your cash flow. You don’t have to accept unpredictability as part of the job. You can take charge and create predictability.
First, try to go back at least three to six months and record your monthly income. If you can go back a year, that’s even better. If the companies you have worked for use a pay stub maker, this process will be even easier.
Use this historical data to make projections for your future. Identify slower times of the year and times where you may bring in more money. Use this information to create and manage your budget.
How to Organize Finances for Tax Season
Tax season may be stressful for everyone, but especially for independent workers. While traditional workers have tax withheld from their paychecks, freelancers do not. As a freelancer, you are responsible for making your own tax payments, and we want to help you prepare.
You can make an educated guess of your annual earnings and then make quarterly payments. A general guide for this is to expect to pay about 15 percent more in taxes than a traditional, W2 employee. You can use an online tax calculator and your historical income data to estimate your taxes.
Also, remember that you can write off some business expenses to offset your taxes. Things like office space, computer, and internet expenses may reduce your taxable income. You may want to consult with a certified accountant for more help on how to organize finances for taxes.
How to Increase Income by Improving Business Practices
No matter how much money you make as an independent worker, you should know how to organize finances. Of course, most would agree that making more money is beneficial, too. We offer a wealth of information on how to improve your small business for greater profit.
Whether you freelance for others or own your own small company, you are sure to find value in our articles. Looking for guidance on promoting your company or yourself online? Check out our tips on local SEO or the benefits of PPC for small business.
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