Top Freelancer Finance Tips To Help You Stay Profitable

Monday, September 24, 2018, 6:00 AM | Leave Comment

Being a freelancer allows you to do want you want while still running a business. However, you may face rare challenges when it comes to your finances.

Balancing the budget, surprise business expenses, fluctuating income, insurance, and trying to save for retirement are all elements of freelancer finance.

The ebb and flow of payments from clients doesn’t mean you need to have a tidal financial plan. You simply need to balance your passion and your pay using a few freelancer finance tips.

The following top tips can help you make the most out of your freelancing career, staying free from the 9-to-5 grind.

  • Know The High And Low Tides Of Freelancer Cash Flow

    The most important tip is that you need to fully understand seasonal cash flow. For instance, freelance accountants have large seasonal shifts that happen every year. During tax season work is steady, but it is followed by a lull for around four months.

    Having that down month cash in the bank is vital, helping a freelance business sustain during slow seasons. You also need to know the sales cycle for your industry. If you’re a retailer that sells $15 items, your sales cycle could be fast. This makes having liquid cash not much of a going concern.

    However, if your company is B2B, your sales cycles may cause you to need extra capital to weather long periods without sustainable profits. After all, the second reason small businesses fail is lack of cash.

  • Stop Putting Off Organizing Your Finances

    One of the greatest mistakes freelancers make is putting off the very important need for bookkeeping. If you’re not good with finances, there are plenty of online platforms available. Using an outsourced bookkeeping service can make managing finances simpler, and even automated.

    This is especially important for freelancers that need to send tons of invoices and track expenses diligently. Unfortunately, most issues rise from simply not being proactive with your bookkeeping.

    And the more you put it off, bigger the problem will be. You’ll eventually be faced with a mess that’s overwhelming, and you will still need to take care of it. The larger the mess is, the more likely you are to procrastinate.

  • Begin Stockpiling Money In An Emergency Fund

    The amount of money you need to earn in order to cover expenses like food, bills, and other primary living expenses is rightfully called, “your break-even number.” As a freelancer, this is an essential number to know.

    To get this number, create a budget and mark all expenses that you absolutely need. This will serve as the amount of money you need to make per month to stay out of the red. Without this number, you can easily find yourself in debt.

    Incorporating emergency funds in the financial calculation can be helpful. This can be three to nine months of expenses diverted to an emergency fund account in case unforeseen expenses arise.

    “If you can put away an emergency fund of up to six months of income, this means that your savings and investment goals don’t have to be put on hold when income is low,” Abdullahi Muhammed of Forbes said.

    Your emergency fund can also help you weather the storm during those seasonal downturns. Begin saving a percentage of every incoming payment and place that money away in its own dedicated account so you focus on saving money.

  • Working Excessive Hours Can Actually Decrease Profits

    Working more than 40 hours per week can be detrimental to your personal health, but also have a negative impact on your profits. Working a lot is definitely common among freelancers, especially for freelancers during busy seasons.

    However, putting all your time and energy into your business at the expense of your health and relationships is never a good idea. It may be acceptable for short periods, but should never be a part of your long-term financial plan. It’s just not sustainable.

    If you’re working yourself to near death, try to imagine what may happen if you scale back on work. Remember to make sure that your labor costs equal out. For example, if you are putting in 60 hours of work per week, how much are you really making per hour.

  • Is Your Freelance Business Profitable?

    Freelancing is a fantastic work option that allows many people to travel the world, or simply work on the sofa at home in pajamas. The rise in remote work has paved the way for more freelance opportunities. If done right, you can set yourself up comfortably when it comes to finances.

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