Managing finances is a tricky aspect of employment, especially for freelancers who can only rely on themselves. In fact, this is one of the disadvantages of freelance work. There can be seasons when you have an inconsistent income and need to figure out how to pay taxes or deal with late payments from clients. If you don’t address such financial issues, you’ll get stressed, fall into debt, or try to get more writing gigs to sustain your expenses—which could lead to burnout. Most importantly, you won’t be able to make the most of your income. With that being said, here are some ways to manage your finances as a freelance writer:
Develop a budget
Having a budget is the first step to responsible financial management. Developing one enables you to split your income according to your needs, like rent, groceries, and bills. It also prevents you from overspending and allows you to cut unnecessary expenses, like excessive entertainment subscriptions. To create a budget, list your living expenses and dedicate a portion of your salary to each item. Ensure that most of your money goes to necessary costs so you don’t get stressed. For instance, you can reserve 50% of your income for bills, 30% for savings, and 20% for leisure. It’s essential to strictly follow your budget to sustain yourself.
Open a separate bank account for your job
Having a separate bank account for work lets you see how much money goes in and out. This can help you determine your future purchases or financial decisions you need to make. It also makes it easier to track your work expenses, such as subscribing to a grammar checker or getting a new computer. This will also benefit you when it comes to reporting your tax return, as you’ll have a straightforward view of your income, expenses, and profit related to freelance writing.
Get an invoicing program
An invoicing program generates billing for your services. It creates invoices for your writing output, facilitates payments, and monitors outstanding invoices. As a freelance writer, you may feel that you’re bothering clients when following up on payments, but remember, this is your livelihood and you should be paid for your hard work. Send an invoice and then follow up if you don't get their payment in a timely manner. Additionally, the invoice program will serve as your payment facilitator, removing the need to make transactions via bank or e-wallet transfers—which can be harder to record. FreshBooks is an invoicing program that’s suitable for most freelance writers. It has a built-in time tracker if you charge by the hour and even the option to connect an accountant to the program for easier tax processes.
Hire a finance professional
Speaking of having an accountant to help you pay taxes, you should also consider getting a finance professional to help you make the most out of your finances. In particular, you’ll need a financial analyst to help you manage your finances for the future. Since freelancing doesn’t guarantee a regular fixed income, you may need help to ensure you're making the wisest financial decisions. Analysts will look at past and present financial data to estimate future revenue and expenses to help you allocate accordingly. They also oversee a handful of financial functions, including budgeting, auditing, and planning how you can spend your money efficiently. Hiring a financial analyst also ensures you can focus more on your writing.
Diversify your streams of income
Since freelance writing doesn’t always guarantee consistently great pay, you’ll need another source of income. As a writer, you should choose side hustles that you can do whether you’re working or not. One example of a side job you may not think of is a pet sitter. This involves taking care of your client’s pets in their own homes while they’re away. Since you’re a writer, you can bring your computer to your client’s house and work when you’re not caring for their pets. Some pet sitters make as much as $26,110 yearly, which is a great way to supplement your income when you don’t have any writing clients. Besides, you may get inspiration for your writing or find a new passion as you explore these additional gigs. Managing finances as a freelance writer can be tricky. Still, it’s not hopeless to get your finances in order by following these tips.
About the Author: Rosie Judson is a freelance writer and devoted cat mom. She dabbles in various topics with a focus on creative writing and animal welfare. In her free time, Rosie can be spotted at home playing video games with her lap cat Bobo.