5 Tips for Managing Finances as a Freelancer

You just started working as a freelancer. You have your first client…now what?


You’ve been a freelancer for a while, but finances are still a struggle…what should you do?

If you’re a brand new freelancer or a seasoned pro, finance tips are always helpful. We’ve compiled our top five tips for managing money below based on some of the most commonly asked questions we receive. Working as a freelancer can be incredibly rewarding, but it can also be a little scary when it comes down to finances, and we hope these tips help ease some of those fears.

#1 Keep Business and Personal Separate

As a freelancer, or even as a small business owner operating as a DBA, it can be easy to mix your personal and business finances, but this can make it tricky to create a true budget to cover expenses for both options. You can move money around as needed, but keep separate accounts, separate cards, separate receipts, etc

Make sure you’re keeping track of business expenses which can be written off of taxes later…

#2 Make Quarterly Estimated Tax Payments

Tax season can be a tense time as you wait to discover just how much you owe, but did you know that you can make payments throughout the year so that you owe less at the end of the year? These are called quarterly estimated tax payments. Work with an accountant to get quarterly vouchers created, and then make the estimated payments. These will cut down on how much you end up owing once tax season rolls around. Quarterly payments are mandatory if your tax burden exceeds $1,000 per year, so be sure to use a 1099 tax calculator that helps you make more accurate tax installments.

If you’re self-employed, you’ll also need to pay self-employment taxes, which are similar to FICA taxes. You’ll be responsible for paying both the employer and employee portions of Social Security and Medicare taxes, which currently total 15.3% of your net earnings from self-employment. However, you can deduct half of your self-employment tax on your income tax return. Be sure to factor in these additional taxes when making your quarterly estimated tax payments.

Depending on how much you bring in, those quarterly estimated payments can still seem like a large sum.  If in doubt, using an invoice generator to track your earnings and ensure that you’re paid by clients is a good way to keep up with your tax obligations, and to avoid any admin errors in the process.

#3 Save Money

Yep, you’ve heard lots of people say this, but we aren’t just talking about squirreling away money for a rainy day. What we’re really talking about is creating a budget. Take those quarterly estimated tax payments and divide out how much you need to save each month, that way when the quarter rolls around and you have to send a check in, it’s not a last minute scramble.

The same can be said for taxes, fees, and expenses overall. Look up tax rates to get a rough estimate of what you might owe each year, and then calculate how much you need to save monthly. If you do this, tax season won’t be as stressful.

But this only covers you from year to year…

#4 Invest in Retirement Options

As a freelancer, you don’t get the option for a traditional 401k in most situations, which means you might not have a long term plan in place for retirement. You still have options available! There are IRAs, HSAs, or even special 401k plans for contractors and small business owners. Make sure to do research on which option is best for you.

And make sure to protect your investments…

#5 Get Insurance

Protect your business as you see fit with insurance, but don’t forget about other forms of insurance such as life insurance. It’s important to have some sort of emergency fund in place in case something happens to you, but also create a cash fund for those small unforeseen things that can happen such as a laptop breaking, new software needing to be purchased, or even a higher charge from an expense! Work this into your budget each month.

These five tips are just a place to start. There are still lots of other great tips out there, but the number one thing we suggest is sitting down with a financial expert. They can help you sort out what sort of insurance, investments, and budgeting needs to take place for you to accomplish your dreams while running a successful business.

Have a favorite finance tip you don’t see listed here? Tell us about it so we can share it!

Disclaimer. The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice.

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