There will be certain periods of the year when work is quiet, like Christmas, therefore it is imperative to have funds saved to pay the bills.
Here are 4 tips to help you budget:
Open a Savings Account
Freelancers– You will need to save up some money before you quit your job and freelance full-time. Once you are a permanent freelancer, make it a priority to add to your savings account as often as you can. We advise about 10 per cent of your monthly earnings.
This will reduce a lot of the stress that comes from not having a regular income stream. You also need to put away some money for unexpected expenses, such as medical issues, house repairs, or new equipment. Even if you have to live frugally in the beginning, make saving money a priority.
SME Owners– There are special business accounts which you can set up. It is vital that you keep the business’s income separate to your personal money, and you can achieve this by setting up a different bank account.
Choose the bank wisely to avoid bank charges; does your current bank offer the best rates? It may be that you could save money by switching provider.
For example, a business with Santander is offering a 12-month loyalty business term account of 3.05%, in comparison to RBS which currently has the Net Rate per annum (p.a) of 0.04% on certain accounts.
Understand Taxes
As an employee, you never had to worry about being responsible for your own tax affairs. However, as a self-employed freelancer and small business owner, you must now understand how taxes work.
You will need to know what must be paid and what methods are available to reduce the amount you have to pay. For all you need to know on registering a business, paying Corporation Tax, and filing a self-assessment tax return, visit HM Revenue & Customs (HMRC).
Plan for Retirement
You should also plan to put away a portion of your money for retirement. As much as you love your freelance career and your own business, there will come a day when you want to spend more time relaxing, than working.
You need to figure out how to best invest your money, and how much to invest in order to be able to retire at a reasonable age. Start putting a little away from the very beginning and speak to an independent organisation, like The Pensions Advisory Service, for expert advice.
Get Health Insurance
You don’t want to put off health insurance; it is a safety net that can save you a lot of time and money in the long- run. Even if you don’t need it now, you will someday; especially if you have a family to look after.
You may have to shop around to find the best rate, but at the end of the day it will give you peace of mind that should you suddenly have to give up work or sell the business, your loved-ones are taken care of.
If you treat your freelancing career and your business just like an ordinary job and put away money for taxes, retirement, and health insurance, you will find that your stress levels will drop drastically.
So make your self-employed career a success by budgeting for emergencies, and your future.
For more information for all freelancers, from freelance accountants to freelance web developers, visit Nixon Williams.
