The new "bankers' hours" is "gig work." Anyone who isn't freelancing wishes they were, and those who are lucky enough to be doing it realize how great it is. However, being a successful freelancer entails more than being able to choose your own hours and working as much as you want. It also implies that you must manage your finances carefully. It's all too tempting to spend your money as soon as it arrives, but because you don't have a regular paycheck or have your taxes deducted regularly, you must be cautious and meticulous with your money. Otherwise, you'll be struck hard during tax season and find yourself without savings if and when you need them. Some of the wise money management measures that might make freelancing genuinely rewarding are listed below.
1. Get ready for a thrilling ride. One of the first lessons every freelancer learns is that there are days when you can't keep up with the amount of work pouring in, and other days when you wonder if you'll ever work again. The rollercoaster is an integral part of the experience, and you must deal with it both emotionally and financially. Because you do not receive a regular income, but you do have regular bills to pay, it is critical that you save money whenever you earn it. You'll be a lot less anxious on those days and weeks when business doesn't show if you know what your usual expenses are and make sure you've covered them now and in the future.2. With each payment you receive, save your taxes. If you've ever worked as a W-2 employee, you're aware that your employer deducts a significant portion of your compensation each week. It was good that your taxes had already been paid when April 15th rolled around – and even nicer when you got a refund – as unpleasant as it felt when you received your first paycheck and discovered exactly how much goes to Uncle Sam. As a freelancer, you are responsible for paying your own taxes, and the simplest method to do so is to calculate the percentage you owe and then deduct that amount from each paycheck you receive and deposit it into a separate, dedicated tax account. As a result, when it comes time to pay your quarterly income taxes, you will already have the funds set aside, and you will be able to cross another item off your to-do list.
3. Pay your estimated income tax payments on a quarterly basis. It may be tempting to wait until April 15th to pay your taxes, but doing so will result in interest and penalties. You are considered self-employed if you work as a gig worker, which means you must pay your federal and state income taxes on an anticipated quarterly basis.
4. Stay within your financial means. Creating a realistic budget and sticking to it, whether you're a W-2 employee or a freelancer, is one of the best money management moves you can do. When you know how much money you need for basic needs and how much money you earn, it's much easier to make sure you're managing your earnings properly, including setting aside a particular amount for savings and taxes.
5. Don’t give up looking for work. It's a good idea to keep your eyes and ears open and promote your business to individuals in your network, even if you're barely keeping up with your work. Even if you adore the clients or tasks that keep you occupied right now, they could vanish tomorrow, and you don't want to have to start all over again. Always have a project in the works.
An experienced tax professional may make a great difference in your level of confidence and economic know-how if you're a freelancer who needs assistance with financial management. To learn more about our services, please contact us.
