Becoming self-employed is a huge step. Suddenly you’re responsible for everything to do with your business, from marketing to finances. Juggling finances as a freelancer can be difficult, even if you outsource to an accountant.
We’ve rounded up a few of the good financial habits you should get into as a freelancer.
Using a separate bank account
If you’re registering as self-employed rather than as a separate legal business entity, then you might be tempted to just use your usual bank account for your freelance career. However, when it comes time to do your taxes, it can be complicated and time-consuming to filter out all of the relevant business and personal transactions.
There are many great business bank accounts out there now. Many of which can be opened and operated through an app. They also come with a range of tools that help you to categorise your spending and even send invoices. If you’re doing work with international clients, choose an account that accepts international payments or a separate Euro account if most of your clients are from the EU.
Get clued up on expenses
Accurately recording your business expenses is a great way to ensure that you’re not paying more tax than you should. But what is a legitimate business expense and what isn’t? Depending on the country you live in and its tax laws, you should clarify what you can and can’t claim for. Get into the habit of logging your expenses as you incur them so there isn’t a huge rush when it comes time to fill out your tax return. There are many great apps that let you log and track spending directly from your phone, without having to keep boxes of receipts. Some business bank accounts have this feature too.
Save a percentage of your income
No one wants to be hit with a huge tax bill at the end of the year. So, even when you’re just starting out. You should send a percentage of your income to a savings account or pot when you can build up funds for taxes, insurance, and your pension. It can be easy to lose track of how much you should be paying. A good rule of thumb is to have 30% of your income saved in this way. Modern business bank accounts make this much easier for you. You can set a rule that tells them to automatically move a percentage of every deposit to either a different account or another saving pot of your business account.
Think before you buy
Even if you’re making good money as a freelancer, being cautious with your spending is always a good idea. Always ask yourself if you really need to buy something as part of your business activities. If you do, shop around for the best pricing and don’t over-spec equipment because you simply want the best.
Getting into good financial habits, both in life and in business can only be a good thing. Not only will you be making the most of your money, but you won’t be paying unnecessary taxes or neglecting important elements such as your retirement fund.