Whether you’re a newbie to the world or freelancing or you’ve been hit hard by tax season, you’ll learn sooner rather than later that every dime counts when it comes to running your business.
Sadly, many freelancers make a number of costly mistakes that hurt their bottom lines, most of which are totally avoidable. Rather than rethinking your freelance career and going back to a dreaded nine-to-five, consider instead how you can keep more money in your pocket by making a few small changes to your spending and saving habits.
The following five tips are essentials for freelancers looking to keep their businesses afloat and ultimately protect their financial futures.
Track Any and All of Your Expenses
While tracking your expenses as a freelancer may seem like a no-brainer, many newbies fail to do so simply because they don’t actually think of themselves as business owners. Even if you’re working a solo gig, the fact remains that you’re probably spending money on your business daily whether you realize it or not. For example, consider how the following expenses can quickly add up over time:
- Money spent on marketing software and advertising (think: social ads, SEO platforms and email marketing)
- Trips to your local coffee shop or co-working space (after all, those lattes and the gas in your car aren’t going to pay for themselves)
- Payment processing fees from platforms such as PayPal or Upwork
Freelancers should therefore invest in a mobile receipt handling system as means of saving money for the long-term. The more you can wrangle your nagging daily expenses, the more you realize how much money you’re really making.
Learn Your Deductions
Similarly, keeping an eye on your expenses will also save you big bucks during tax season.
There are a variety of tax deductions for freelancers out there, including deductions for your home office space, business travel and marketing expenses. By having these expenses clearly tracked and defined, you can easily file them on your taxes and provide proof to the IRS if necessary.
Rethink Your Pricing Structure
If you’re a first-time freelancer, you probably aren’t making nearly as much money as you think that you’re making.
For example, if you’re charging an hourly rate or have clients asking for constant revisions on projects, you’re inevitably hurting your earning potential. Take the time to calculate your true hourly rate and consider charging on a project-by-project basis versus by the hour: after all, time is money.
Don’t Neglect Your Non-Billable Hours
Seemingly minor tasks such as responding to emails, filling out invoices and marketing your businesses can quickly add up week-by-week in terms of your time.
However, bear in mind that you aren’t getting paid for these tasks and therefore should do everything in your power to streamline them. From invoicing software to apps such as Hootsuite which queue up your social posts, simply be aware of how much time you’re spending on “the small stuff” and don’t let these duties get in the way of your bottom line.
When In Doubt, Put More Money Away
It never hurts to put more money away than you think is necessary. Rather than constantly worry about tax season, retirement or medical emergencies, strive to save as much disposable income you can into a high-interest savings account, for example. Don’t put yourself in potential financial ruin by not saving enough: instead, do everything in your power to build up a nest egg to avoid any “what-if” scenarios.
While there are many benefits of being your own boss, there’s plenty of stress that comes along with flying solo. Protect yourself financially by plugging up the holes in your spending and saving habits accordingly: you’ll thank yourself when tax season rolls around again.