5 Budgeting Tips for Freelancers

As a freelancer, managing your finances can be a daunting task. Without a steady paycheck, it's easy to get caught up in the feast-or-famine cycle, where you either have too much work and too much money or too little work and too little money.

However, with the right budgeting strategies, you can break free from this cycle and achieve financial stability. In this post, we'll share five budgeting tips specifically designed for freelancers.

Tip #1: Track Your Income and Expenses

The first step to creating a budget is to track your income and expenses. As a freelancer, your income may vary from month to month, so it's essential to keep a record of all your earnings.

You can use a spreadsheet, a budgeting app, or even just a notebook to track your income and expenses. Make sure to include all your sources of income, including clients, projects, and any other freelance work.

On the expense side, include everything from business expenses like equipment, software, and travel to personal expenses like rent, utilities, and groceries.

Some popular budgeting apps for freelancers include:

• Mint

• Personal Capital

• YNAB (You Need a Budget)

• FreshBooks

Tip #2: Create a Separate Business Bank Account

As a freelancer, it's essential to separate your personal and business finances. This will help you keep track of your business expenses and income, making it easier to file your taxes and manage your finances.

Open a separate business bank account and use it exclusively for your freelance work. This will help you:

• Keep your personal and business finances separate

• Track your business expenses and income

• Make tax time easier

• Build business credit

Some popular banks for freelancers include:

• Chase Business Complete

• Wells Fargo Business Choice Checking

• Bank of America Business Advantage Checking

• Capital One Spark Business Checking

Tip #3: Set Aside Money for Taxes

As a freelancer, you're responsible for paying your own taxes, including self-employment taxes. This can be a shock if you're not prepared, so make sure to set aside money for taxes throughout the year.

A good rule of thumb is to set aside 25-30% of your income for taxes. This will cover your federal income taxes, self-employment taxes, and any state or local taxes.

You can set aside money for taxes in a separate savings account or use a tax withholding service like Quarterne.

Tip #4: Plan for Irregular Income

As a freelancer, you may experience irregular income, where you have feast-or-famine periods. To plan for this, create a budget that accounts for your average monthly income.

You can do this by:

• Tracking your income over a year to determine your average monthly income.

• Creating a budget based on your average monthly income.

• Setting aside money in a savings account for slow periods.

This will help you smooth out the ups and downs of freelance income and ensure you have a steady stream of income throughout the year.

Tip #5: Prioritize Emergency Savings

Finally, prioritize emergency savings as a freelancer. This will help you cover unexpected expenses, like car repairs or medical bills, and ensure you can continue to work even when faced with unexpected setbacks.

Aim to save 3-6 months' worth of living expenses in an easily accessible savings account. This will provide a cushion in case of emergencies and ensure you can continue to work without interruption.

Some popular savings accounts for freelancers include:

• Ally Bank Online Savings Account

• Marcus by Goldman Sachs High-Yield Savings

• Discover Online Savings Account

• CIT Bank High Yield Savings Account

Conclusion

Budgeting as a freelancer can be challenging, but with the right strategies, you can achieve financial stability. By tracking your income and expenses, creating a separate business bank account, setting aside money for taxes, planning for irregular income, and prioritizing emergency savings, you'll be well on your way to financial success.

Remember, budgeting is not a one-time task; it's an ongoing process. Regularly review your budget, make adjustments as needed, and stay focused on your financial goals.

FAQs

Q: What's the best budgeting app for freelancers?

A: The best budgeting app for freelancers depends on individual needs and preferences. Popular options include Mint, Personal Capital, and YNAB.

Q: How much should I set aside for taxes as a freelancer?

A: A good rule of thumb is to set aside 25-30% of your income for taxes.

Q: What's the best way to plan for irregular income as a freelancer?

A: Create a budget based on your average monthly income and set aside money in a savings account for slow periods.

References

• "The Freelancer's Guide to Budgeting" by The Balance.

• "5 Budgeting Tips for Freel.