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How To Manage Your Money As A Freelancer

Freelancers, pat yourselves on the back. You should be proud.

You’re a small business owner making your own money on your own terms.

That takes a ton of moxie and countless hours of your time.

Whether you're hard at work managing a blog or busy creating content for your customers you’re running a serious business.

You’re putting out a product and people are paying you for it.

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Whatever your reason for freelancing, and whatever your services are, you’ll need to manage that money so you can grow your business.

After all, why start a business if you can’t sustain it?

But since most of us don’t hold a degree in finance, the biggest question is, “How do I manage my money as a freelancer?”

Don’t worry, you don’t need an education in finance or be an accounting expert to manage your small freelancing business. And unless you’re making tens of thousands of dollars every month, you can do it yourself by following these six simple steps.

Follow these six simple steps to manage your #money as a #freelancer. ~ @ChristineCRenee

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1. Separate Personal and Business Bank Accounts

The first thing you want to do as a small business owner is to separate your personal money from the money you get from your business.

This makes bookkeeping easier because you won’t have to slog through which transactions are personal and which ones are from your business when it comes time for taxes and verifying business growth.

Keeping separate accounts also saves your butt in case you have the pleasure of going through a tax audit.

Two ways you can go about this:

  1. Open another account with your existing bank and use that account to funnel freelancing income into and pay out expenses from there.
  2. Find a separate bank that will be used just for your business. 

Pro Tip: I prefer the second way because you can have multiple accounts set up with one bank. Maybe you have more than one business, or you have multiple savings goals for your business. Having one bank to house all your business bank accounts makes it easy to track.

If you’re going use a separate bank for business, get one that is online.

As an online freelancer, you have the ability to move about the world. So why not use an online bank that moves with you?

If you’re looking for a good bank to house your money, look for ones that are free to sign up and have no minimum balance requirement - unlike traditional business banks that are full of fees.

Look for these features in an online bank:

  • Free to sign up.
  • Free to manage - no deposit or balance minimum.
  • Allows at least one checking and one savings account that are linked.
  • Fee-free transfer and deposits.
  • Free mobile deposits and/or free ATM access (or if they offer an ATM fee refund).
  • The ability to link outside business tools and other banks like PayPal or Mint.
  • Is entirely online, so all you need is internet access.

Freelancing comes with a variable income. Some months will be leaner than others, and if you’re just starting out, you won’t have the extra money to pay banking fees so look for one that is free.

Just make sure you’re keeping your personal money and business money in separate accounts.

2. Set a Business Budget

Don’t let the word “budget” scare you.

Setting a budget for your business means you’re smart! A budget helps you plan out your monthly business income and expenses before the month begins.

The easiest way to manage a budget for your small freelancing business is to use the zero-budget technique.

The zero-budget technique is perfect for #freelancers. ~ @ChristineCRenee

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A zero-budget is flexible enough to handle your variable income, so it’s perfect for freelancers.

With a zero budget, you’ll plan out the money you expect to get before the money actually gets to you. It’s a great way to make sure you’re keeping expenses and spending low.

Pro Tip: Let’s say, for example, that your monthly average income is about $2000 a month. This number will be something you KNOW you’ll get in revenue for the next month (don’t include “possible” income).

And say your monthly business expenses (including any business savings) is around $1800.

Then you’ll allocate the entire $2000 into all the different expenses and savings until every dollar is spent on paper.

Allocate until you get to zero.

Here’s how budgeting helps your business:

  • You get to see where your money is going so you can plan what you can and cannot do with your business.
  • You'll see where you’re overspending or underspending each month.
  • You get a better idea of how much income you need and/or how many expenses you can cut out.

The best part about the zero budget is that it’s flexible.

If you expect to bring in less money next month, this technique will help you figure what to cut back on before you find yourself with a bill and no money to pay for it.

If you’re planning to get more money next month, great, allocate that extra money to savings or put it back into the business.

A business budget helps you spend less than you earn. A smart rule to follow if you want your business to succeed.

3. Check-In With Your Finances Every Week

A budget does nothing for you unless you use it.

Get into the habit of checking in with your budget and cash flow once a week to make sure you're not spending more than your business is earning.

As a freelancer, you know all too well that some clients don’t pay on time, which makes last-minute adjustments necessary.

A weekly check-in helps you adjust sooner than later.

Here’s what to look for:

  • Are there any business subscriptions due this month/week?
  • How many invoice payments are due from clients this week/month?
  • Do you need to adjust the budget to accommodate any new income or expenses?
  • How much does it look like your business will make this month?

And, as you check with your budget, why not take the time to check in on other business-related items that help you make money:

These tasks are all related to you making more money in your freelancing business.

4. Time Your Projects and Invoices So You Can Demand On-Time Payments

This is a topic I don’t hear about very often from the freelancing community.

It’s important for you to time your projects and client invoicing to be completed and paid within the same month.

This can be tricky because getting projects lined up for the next month means being in constant contact with new clientele.

The point here is to schedule, complete, and invoice projects within the month so you can get paid sooner rather than later (and preferably within that month).

You also need to demand on-time payment within a shorter amount of time.

Be professional about it and let the client know this before work is started so put it in your contract that payment must be made by the due date or hefty fees will be added on to each day payment is late.

You’re running a business, and you must be paid on time, so a good rule of thumb is to reduce your “invoice due” time from 30 days to 10 or 15 days.

Good clients will have a budget already set up when they hire you and should have no problem paying you immediately upon invoice. But some clients may need more time, reducing your time for payment within 15 days can get you paid within the same month.

I let my clients know before work starts that payment is due within 15 days of invoice and a fee penalty is incurred for each day payment is late. I haven’t had any problems yet.

Remember, as a freelancer you set the rules for your projects and payments. Just make sure your terms are clearly stated in a freelancing contract.

5. Set Aside Money for Taxes (US/UK)

If you’re doing business in the US, good old Uncle Sam wants a piece of your pie.

Disclaimer: I am NOT a tax professional, and my best advice would be to speak to one before you do anything else with your freelancing monies as they pertain to taxes.

If you’re not a U.S. citizen or you’re not doing business in the US, the country you reside in may have tax laws of their own. Please contact a tax professional in your area for advice.

With that said, it’s an excellent idea to put away 30% of whatever you make in a month (or per transaction) into a savings account specifically set for tax payments. Taxes are normally due at the end of each quarter in the US.

Your tax bracket may or may not end up being 30%, but it’s better to have more money saved at tax time than not having enough, especially with your variable income.

If you’re in the UK, you need to put-away for taxes whether you’re a sole trader or a limited company. The tax amount will depend on your earnings/profit. The Queen wants her fair share too.

You don’t want to end up owing a hefty tax at the end of the year because you didn’t save for it. Be sure you’re putting enough money away every month to be able to pay your share of taxes.

Set Aside Money For Taxes

6. Set Aside Money for Savings

As a freelancer, you’re all too familiar with clients who don’t pay on time, and you’re also not a stranger to having a lean month due to a lack of work.

This is why you need to save extra money in the case you have a late client payment, non-payment, or no-work situation.

If you have a regular day job, save some money each paycheck to cover the business essentials like web hosting fees, plugins, business subscriptions or the salary of your virtual assistant.

If you are a full-time freelancer, whenever you have a big win, save the extra money (after expenses and taxes). You’ll be happy you did when you’re low on cash.

Saving money will protect your business during times of low income. And that’s just smart business.

3 Online Tools to Help You Manage Your Money

Here are three online tools to help you manage your money.

1. Everydollar

everydollar

Everydollar is a US-based online budgeting tool. It uses the zero-dollar budgeting technique. No spreadsheet required.

everydollar dashboard

Everydollar does the math for you. Just put in your expected income for that month and allocate money to your expenses until you get to zero.

2. Mint

mint

Mint is available in the US and Canada. It’s free and keeps track of all your bank accounts, credit and debit cards, and other accounts like PayPal.

mint transactions

Mint makes it easy to view and manage all your accounts in one place. Handy when you want to check in to see if a client paid their invoice or see how much is left in your business account(s).

3. Quickbooks

quickbooks

QuickBooks Self-Employed (US) will be your new best freelancing-business friend.

quickbooks-self-employed

This online version of QuickBooks keeps track of all your banking accounts (just like Mint) but has an invoicing system and a tax projection feature that tells you how much you’ll owe in taxes at the end of each quarter (my favorite feature).

I couldn’t find any other affordable small-business app like this one. I highly recommend you check them out if you’re a US-based freelancer.

Wrapping it up

Freelancing is a rewarding experience and can be a lucrative business if you’re able to sustain and maintain a good amount of cash flow and manage it properly.

You don’t need a fancy education in finance to manage your money as a freelancer, just remember to follow the basics:

  • Spend less than you earn - track your money with a budget.
  • Check in with your business money once a week.
  • Save for emergencies and future growth.
  • Save for taxes.
  • Use the right tools for you - automate.

You don’t need a fancy education in finance to manage your freelance money. ~ @ChristineCRenee

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How have you managed your money as a freelancer so far?

  • Share your thoughts and experiences in the comments below.
Christine C. Renee
 

Christine is a money & business freelance blogger. She's passionate about helping solopreneurs and side hustlers manage their money. Her love for blogging shows in her proven track record where her clients get results! Want to learn more? Follow her on social media or visit her little corner of the internet.

  • What a fantastic post. I’m going to check Every Dollar out. I currently use Wave to handle invoices. One the best things I did for my business was to separate business and personal. I really like the idea of budget to zero.

    • Thanks, Sara! Christine has shared some actionable tips here, so It’s great to see you checking a few of the options.

    • Hey Sara,
      Thank you, glad you’re able to take away something helpful from this post. I’ve heard a ton of good things about Wave but never used them. I’m going to check them out.

      I hope Everydollar can help you budget. I use it for both my personal and business budgets.

      Thanks for reading and commenting!

  • Ilka Emig

    Hi Christine! Good to see you over here. And thanks David for having Christine 🙂

    You are spot on Christine. As freelancers we always have to deal with variable income and clients paying late. I’m also in danger of losing control over my subscriptions (due at different times, some yearly, some monthly). So, it’s absolutely crucial to stay in control and have a good system that works for you.

    Thanks for all the tips. – Ilka

    • Thanks, Ilka! You’re right, “…and have a good system that works for you.” I created a spreadsheet to list all my regular monthly and annual subscriptions so that I could work out a budget. It’s so handy to take a quick look and see what’s due for the month.

    • Hey Ilka!
      Good to see you here too! I’m so glad you found this post helpful. I also have a time wrangling all my business subscriptions. Like David, I have a spreadsheet but I also put the due dates in my Asana calendar so I can see them coming.

      You’re welcome! Thanks for commenting!

  • Hi Christine,

    Thanks so much for writing such an informative and actionable post to help freelancers manage their money. I learned plenty of techniques, and I also learned a new word: “moxie,” as in, “determination.” Not come across that one in the UK or on the web.

    Thanks again!
    – David

    • Hi David,
      Thanks so much for letting me write for your amazing audience. I hope it helps freelancers manage their money better.

      Really? I didn’t know moxie fell out of fancy online. Glad to be the one to bring it back. It perfectly applies to freelancers doesn’t it! 🙂

      Thanks you!

  • Andrew M. Warner

    Hey Christine,

    Really great post on David’s blog here.

    I know the mistake I made early on in my online days was not having a separate bank account. I learned my lesson quickly because I was never able to actually keep track of how much I was making online.

    The budgeting aspect is something I don’t really do but after reading this, I can see the use for it. It’s basically keeping everything organize so you KNOW what’s being used for what.

    Will definitely start changing my mentality and start changing some things around.

    – Andrew

    • Thanks, Andrew. I think not separating bank accounts is an all-too-easy mistake when you’re starting off. I’m sure many freelancers do that, perhaps because they think it will be too much hassle. In reality, as you said, the hassle comes from not knowing exactly what your biz income and expenses are.

    • Hey Andrew,
      Thank you for the kind words! I’m happy this article gives you a new perspective on business budgeting. 🙂

      In the beginning I didn’t budget either but when I started overspending on business subscriptions, books, and courses, I got myself into trouble when I couldn’t find writing work. It’s very helpful to plan your money beforehand.

      Thanks so much for reading!

  • This is great. I love the zero-budget and a lot of the ideas. Will save this info.

    • Thanks, Jo! Great to see you here and pleased the info has helped you.

    • Hi Jo,
      Thank you! I’m glad you found these tips helpful. 🙂 Yea, the zero-budget is my favorite from all the other budget techniques I’ve tried.

      Thanks again, happy weekend!

  • I am using Walnut app which is very helpful to track expenses. It scans our text messages and make a record of online and ATM transactions. There are many other features like money split, etc as well.

    • Thanks Yogesh! That’s a new one to me.

    • Hi Yogesh,
      I love hearing about new money apps and that Walnut app looks interesting. That’s great you use it to track your expenses, every tool helps. Thanks for sharing and commenting. 🙂