Professionals are taking their idea of the workplace into their own hands. Just this year, 35% of the US workforce was freelance. While it’s expected to be raised to 43% by 2020, which is right around the corner. It might seem like a daunting space to jump into, especially thinking about being your own boss and managing freelance finances, but the one thing is you’re definitely not alone.
How to Manage Freelance Finances
However, it’s imperative to have as much information to make the best decisions regarding your working set-up, finances and how to create a space that feels authentic to you. Money isn’t the be-all and end-all but it’s a necessary tool to navigate life and especially as a woman, it can mean freedom and independence. So if you’ve thought of leaving the 9-to-5 world, but are overwhelmed by the admin tasks behind it all, here’s a guide to getting your finances together and what to expect from freelance life.
Keep thorough records of your freelance finances
Get a handle on how much you spend each month and be honest with yourself.
Do you enjoy buying a fancy coffee three times a week? Do you like eating out? You should factor in those expenses when looking at how much you’d need to sustain your lifestyle. This might be the ideal time to review why you’re spending and how you can trim your expenses in a way that won’t make you miserable. The main thing is to get into the habit of recording as much money coming in and what invoices are outstanding. Know when your subscriptions are coming off, your rent is due and whatever other regular expenses happen in your life.
I chatted with South African author and freelance editor/writer, Cayleigh Bright to give some insight. “I suggest a simple Excel spreadsheet tabling everything you’ve invoiced in a month, with a total for that month, whether or not you receive the actual payment,” she says. “ It’ll help you when it comes to tax time, help you to follow up on payments you haven’t received, and help you to keep an eye on whether your earnings are matching or exceeding the salary that you were previously earning.”
Chasing outstanding payments is part and parcel of the industry
Every freelancer I spoke to told me about the bane of late payments. The unfortunate part of contract work, is that you might wait more often for money owed to you. Unlike your 9-to-5 job, the reality is that you’re not guaranteed a check on the 15th or 30th of every month. But your bills certainly won’t wait for anyone.
The best way to counteract this is to know the payment schedule of whatever company or organisation you’re working for. Do they pay in 30 days, 60 days or whenever the work is published? Make sure to get a point of contact (or even more than one) when it comes to finding out when your money will finally get to you. If it’s a once-off job, ask for a deposit. Yes, you can ask for money upfront, so both parties know that they have a monetary investment in the project.
Bright says, “In addition to allowing you to pay the bills and eat while getting the work done, it also keeps clients efficient: even if the project you’re working on isn’t their top priority, they’re way more likely to keep on track with feedback, etc, if they’ve already spent money on it.”
Another important factor to note, no matter what industry you’re in, is what companies have a good reputation with freelancers. It’s vital to know who you want to work with and what troubles might come with the work you do. Yes, you need cash flow but it may not be worth it if you’re waiting for months and feel financial strain throughout.
Find out about tax laws and when your tax season starts
Tax laws differ around the world, and you may be taxed 25% on every amount you earn or need to pay a certain amount on your estimated income. Keep your invoices on file, along with other important receipts or documents. If you’re working from home, using a cellphone or paying for internet, there may be a way to claim back for these expenses. It’s important to note how your income will change and how the taxes will differ too. The best thing is to have a separate business account for your potential tax payments, and if you’re able set up an emergency fund savings account and have a credit card for emergencies. Alternatively, if it’s all too complicated for you to deal with, hire someone to help you stay on track. It might seem like an unnecessary expense in the long run, but peace of mind really is priceless.
Don’t want to freelance? Consider remote work
If the world of freelancing doesn’t appeal to you, but you’re feeling stifled in your current job, it might be time for a change. The traditional 9-to-5, fixed office location just doesn’t measure up in 2019 anymore and more people are working remotely. We all want more time to do other things, like running errands or getting a run before work starts and being productive isn’t just limited to being stuck in front of a desk.
New Yorker Anja Tyson, a sales director for an international sustainable packaging company, recently made this leap. Tyson, a former All The Pretty Birds contributor, was offered the opportunity to work from home full-time and as a solo parent, this has been unbelievably helpful.
“I pivoted within the fashion world to a new position earlier this year after being presented with an amazing opportunity to make a difference in the world through plastic waste reduction,” she says. “Because my new employer is based abroad, I work from home. It’s been a big adjustment for me, I am very used to having an office and a showroom and a team and work family on site every day.”
The access we have to technology means you don’t need to be in the same office as your co-workers. I work all the way in Cape Town, but engage with co-workers/collaborators in Milan, the UK and the US.
Tyson says, “It’s been about six months now of this new lifestyle and I love it. I get more work done each day because I don’t commute! I am a hyper-organized person, so I am strict with myself about the way my day is structured, holding myself to deadlines and expectations, and getting my work done. I miss having an on-site team because I love being around people, but I am out visiting clients all the time, which is also fun and exciting.”
So, whether you’re aiming to go freelance, want to be better with your finances or just need a shift in your working environment – make the change! It’s never too late to start a new chapter in your life, pretty birds. Are you trying to go freelance and want to share more about it? Let us know in the comments below!