In today’s society, many people work solo or part-time jobs, like fixing up old furniture, giving rides, or making websites. They also depend more and more on these other ways to make money. Freelancers choose their clients, set their hours, and can change their tasks as needed. They also have other sources of money to help them. But your gains will differ since you don’t get paid regularly by a company. Keeping track of your money may be hard if your income changes a lot.
Freelancers can be anyone from people who work on their projects on the side to people who don’t have a regular job. Freelancing is a popular way to make money because it has many perks. The pros of a changeable income may not outweigh the risks and problems that can pop up. Some people like to do independent work on the side while they have a “day job,” but others want to get a “real job” on their terms. You might be able to make better choices if you think about the pros and cons of working alone.
Your first step should be to plan how much you will spend each month. Knowing how much money you need to pay your bills, save money, and live easily is essential. You can use this information to estimate how much you’ll make as a freelancer. These are methods of financial education that every freelancer needs to have to make savings moving forward.
People who work on their own are sometimes called “independent contractors.” This job is not the same as a typical 9-to-5 job. Instead of having your taxes taken out of your paycheck immediately, you’ll have to save money every time you get paid. Do this often, like once a week or monthly, to keep your money from becoming a drag.
Freelancers and independent workers have to pay taxes every three months. Since taxes aren’t taken straight out of your paycheck every month, you’ll have to pay them every three months instead. You won’t have to pay late fees in April if you pay all federal, state, and local taxes every three months. You can also rest easy knowing your yearly tax payment will be small.
If you’re new to the gig economy or working, you might not understand how taxes work. That’s reasonable, but if you try to do your taxes on the fly, you might make mistakes that cost you money. Instead, look for help from outside. You might feel better about yourself and be able to relax more if you know you paid your taxes correctly.
Don’t forget about saving for retirement just because you don’t have a W-2 job with retirement benefits. You need to plan if you work independently and don’t have retirement benefits. Think of the money you put away each month for retirement as a set cost. Individual Retirement Accounts, Roth IRAs, Simplified Employee Pensions, and Solo 401(k)s are all excellent ways to save for retirement.
When you are a freelancer or work in the “gig economy,” your pay changes yearly. Sometimes you don’t have much money because of a cost that came up out of nowhere. You can’t say enough about having a backup fund’s importance. When things are going well, and there are lots of jobs, don’t be afraid to save some money for emergencies. Money needs to be set aside for costs coming out of the blue.
Most self-employed people get different paychecks every month. If you don’t have the right tools, it’s easy to lose track of your income. Keep careful financial records to determine how much you owe in taxes. Keep track of every bit you spend on your business during the year because you can claim some of these costs when you file your taxes. Also, if you keep track of your income and spending now, you’ll have less to think about when it’s time to pay your taxes.
Some independent workers may use their credit cards or take out loans when times are tough. This could cause a debt snowball that quickly gets out of control. Since interest builds up over time, a loan that seems small initially could cost a lot.
With a debt consolidation loan, you might be able to make fewer payments each month and get out of debt faster. Make sure you’re paying the least interest possible, and if you can, see if you can get a balance transfer card with no interest to help you pay off your debt even faster.
There are many benefits to being a freelancer. Make smart choices about money as you deal with this, at times, unstable job situation. The above tips will help you improve how you handle your money and career now and in the future.