First, if you’re a successful freelancer — congratulations! It’s a great gig if you can find consistent clients, so we’d just like to give credit where it’s due.
However, setting your own hours comes with a few interesting financial considerations. For example, can you save for retirement? How do your taxes work? We’ve got the answers you need, so read on to learn how to manage your finances as a freelancer.
Separate your personal and professional bank accounts
Freelancers are essentially small business–owners, so you should do what we advise small businesses to do: separate your personal and professional bank accounts.
Bookkeeping is a slog when you need to pick out the business expenses from your grocery bills, so keep everything in its place to simplify things.
Set aside money for taxes
One of the less fun aspects of freelancing is tax season. If you’re new to this, you may not know how much the US government wants from each paycheck — unfortunately, it’ll be more than most other jobs.
We aren’t tax experts (and you should absolutely speak with one), but we suggest setting aside around 30 percent of every paycheck specifically for taxes. You may not end up needing to give away every cent of this money, but it’s better to set aside more than you need.
Normally, you should expect to pay your taxes at the end of every quarter.
Start a retirement plan
Some people think they need to work at a big corporation to get the benefits of a retirement plan, but that’s not true. Your plan may look different than that of a salaried employee, but you can still set aside a lot of money to make your retirement great.
Look into a self-directed IRA — it’s perfect for businesses with a population of one.
Now that you know how to manage your finances as a freelancer, keep up the consistent work, set aside money for taxes and enjoy your retirement.
