Search
Close this search box.
Blog » Business Tips » How Freelancers Can Balance Business and Personal Finances

How Freelancers Can Balance Business and Personal Finances

freelance strategies

Handling and organizing money is essential to your survival and growth as a freelancer. Many people will talk to you about how to increase your freelance rates, or where to look for more work. But how to actually handle the money you’re bringing in? No one really talks about the balance between personal finances and business finances for freelancers.

How you organize the money that you earn, and how you use it to live your life outside of work is probably the most important skill that you can have. Here’s how freelancers can balance business and personal finances.

Set Up a Business Account

The first step for any freelancers, no matter the type of work they’re doing, is to set up a business bank account for themselves. It’s very easy; simply apply for an EIN for free, and then use that to open a bank account for your business income.

Keeping your business and personal finances separate will help you organized from the start. It’s only getting more common to get paid online, having a business account offers some privacy and protection for your personal funds.

Know Your Tax Burden

Taxes have to be paid no matter what. That’s why understanding how much you owe for quarterly taxes and for your annual tax burden throughout the year. It’s very painful to have to pull money out of your personal finances to pay your business tax debt.

You can estimate your quarterly taxes here, and should always make payments. Your freelance business is not a hobby- if you can’t pay for it from the profits of your work you need to reassess how you’re doing business.

Save a percentage of each paycheck for taxes. That way, you’ll keep up with your tax obligation as the year progresses and hopefully never get behind.

Create a Business Plan

When you freelance it’s all too easy to treat it like a hobby and not like a full time job. But this IS your job. Creating a business plan- that is, a plan for how you’ll make money throughout the year- will help guide you through the months.

For example you can say that in 2018 you want to start off with 6 design clients a month for January-June, and then take June and July to focus on collaborations on social media. From August-December you plan to grow your website revenue and social media followings to generate cash from sponsored content.

Write all this down and be as specific as possible. Freelancing comes with feast and famine months. Your business plan will guide you in the famine months.

Your personal finances and business finances should live in different worlds. Focus on making your business profitable and keep it organized, and you’ll see that your personal finances do well.

[Read: How Fintech Can Help You Manage Your Personal Finances]

About Due’s Editorial Process

We uphold a strict editorial policy that focuses on factual accuracy, relevance, and impartiality. Our content, created by leading finance and industry experts, is reviewed by a team of seasoned editors to ensure compliance with the highest standards in reporting and publishing.

TAGS
Student Loan Expert and Founder of Bravely Go
Kara Perez is the founder of Bravelygo. Kara discovered her love of finances courtesy of her quarter-life crisis. Broke, underemployed and saddled with student loan debt, she realized that her lack of financial education was crippling her adulthood. She now connects individuals with how to save and make money. She freelances in the areas of personal finance.

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Categories

Top Trending Posts

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More