The number of people who are looking at freelancing continues to rise. Statistics reveal that there are around 53 million freelancers in the United States and around 77 million the world over. Besides, the gig economy’s addressable market accounts for around $1.5 trillion. While life as a freelancer comes with a number of benefits, one probable downside is the unsteady inflow of money. Fortunately, some financial prudence goes a long way in the life of any freelancer.
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Keep Track
If you want to establish a financial roadmap, the first step is to determine how much you earn. A simple spreadsheet gives you an easy way to make note of how much money flows in every month. With this data at hand, looking at how much you made last month compared to the same month in the year that went by gives you insight into how you’ve grown. By keeping track of your monthly earnings, you also get to find out if you experience a lull or an increased demand in any particular month. This gives you the ability to prepare for such periods in advance.
Go Global
With the internet at your fingertips, it makes sense to look for international clients. This can lead to more opportunities, and you may get paid more too. When receiving payments from international clients, using the right service provider may lead to savings. For instance, specialist money transfer companies such as CurrencyFair and TransferWise consistently offer bank beating exchange rates and they tend to charge lower fees as well.
Think Zero-Sum
Using a zero-sum budget means you put every last penny to good use. Basically, all the money you have left in your checking account should go into a more suitable financial alternative at the end of each month. Tools that you have at your disposal include savings accounts, term deposits, stocks, bonds, and more.
Increase Your Rate
Freelancers are often found wondering how often they should increase their rates and what makes for a suitable hike. For starters, you may want to check how much money other proficient freelancers in your field charge for their services. I tend to ask for a 10% hike once a year and none of my longstanding clients have had a problem with this. In addition, I increase my rate by 10% at the end of each financial year for all new clients. Asking a new client for a hike in the first few months may not be such a good idea.
Stay Tax Aware
Getting in touch with an accountant shortly before tax season may not work well for you because the busy period might require that you spend more money. Besides, staying in touch with your accountant through the year gives you a better picture of the expenses you may claim as deductions. Freelancers who file their own taxes should take time to delve into local tax related rules and regulations.
Get Insurance
According to a report released in 2016, around 20% freelancers are without insurance. If you don’t have insurance, even a seemingly non-critical medical problem can serve as a considerable setback. Freelancers under 26 years of age may benefit by staying under their parent’s plans. For those under the 30-year mark and no dependants, an affordable catastrophic plan may well be enough. People who own automobiles should invest in suitable cover. If you have a family to support, consider getting life insurance.
Plan for Retirement
According to a 2016 Greenberg Quinlan Rosner Research poll, around 40% freelancers have not given enough thought to their retirement plans. Saving for the long term, though, requires that you plan for your retirement well in advance. In the U.S., freelancers may turn to a Solo 401(k) or a Simplified Employee Pension Individual Retirement Arrangement (SEP IRA).
Conclusion
Rainy days are part of almost every freelancer’s life, and you can deal with them easily if you play your cards right. Savings can come in different forms, and as far you as follow a few simple measures your finances do not have to get the better of you.
About Carson Derrow
