Self-employed individuals are responsible for their own taxes, healthcare, savings, business expenses, and more. It can be an emotional and financial burden when not handled carefully, so you should see to it that you have a handle on your money. Here are some tips to help you with the money management front.
Save enough for lean months
When it comes to freelancing, you always have to prepare for periods where projects don't come in as much as you want them to. Freelance work is unpredictable, and dry spells are pretty much inevitable. Seasoned freelancer Tae Haahr suggests saving up enough money to cover said lean periods, which means that you have to have an emergency savings account that contains enough to cover somewhere between six months to a year of monthly bills. Hopefully, the dry spell won't last so long, and you can start raking in your target revenue again.
Diversify sources of income
Even though consistent work from a single client offers welcome stability, you shouldn't be dependent on one job alone. It's best to diversify yourself across clients, not only to generate income, but to also build a considerable client base and reputation. According to Dr. Erika Rasure, assistant professor on the online MBA in financial services program at Maryville University , freelance opportunities can be found on sites like Fiverr. In her interview with Innovation Management , she also says that “if you’re the crafty type, consider opening an online storefront on Etsy or getting involved in local craft shows in your area.” If you're a pro at something, you can also offer consulting and coaching services to newbies in your field. When you diversify your income streams, you're also ensuring that you always have a strong influx of receivables to fall back on.
Be firm with your rate
When negotiating rates with clients, it's easy to cave in to a lower rate just to secure the project. Keep in mind that many potential clients you'll come across will ask for a lower rate than what you originally quoted, and you have to be firm with your pricing. Your time is valuable, and you can't risk undercharging as it will only lead to less profits and wasted hours. From the get-go, make sure that your rate covers everything from the start by using tools like the Virtual HQ Freelance Rate Calculator , so you can take into account every facet of your freelance work. Once you've identified what you're worth, be firm and don't budge easily to secure the income you deserve.
Keep tabs on your taxes
Freelancers are burdened with the responsibility of handling taxes on their own. As opposed to full-time employees where their employers withhold and pay a portion of them, freelancers must handle it all on their own. The last thing you want is for self-employment taxes to cause unnecessary stress, so you need to keep tabs on how much tax you have to pay. The best thing to do is to set aside at least 30% of your earnings every single time you get paid. That way, you won't have to scramble for money come tax time. You may also want to look into paying quarterly taxes to avoid incurring any penalty.
Exclusively written for chrometa.com By Armi Trinidad
The modern freelancer has a lot of plates to spin on a daily basis in order to succeed – and there never seems to be enough hours in the day. Those that use their limited time most efficiently will blow past the competition and make an impact in their chosen market. . Read More