Fluctuating monthly incomes are synonymous with freelancing. To avoid financial hardships, it is important to create a budget, establish an emergency fund and plan ahead for tax obligations.

Separating personal and business expenses will allow you to keep track of spending more easily while also making receipt organization a breeze. An accounting app can help you gain insight into your freelance income and expenses by generating reports.

Create a budget

    The unpredictability of your earnings means that creating and staying within a budget is crucial to handling uncertain times.

    Start by tracking all sources of money coming in, such as payments from clients or revenue made from marketing efforts. With the help of software like Moon Invoice, organizing invoices by date, amount and client is seamless. You could also do this on a simple spreadsheet if preferred.

    You’ll then move onto tracking all outgoing funds so you can quickly see what costs are necessary versus which ones aren’t—like equipment, home office rent, internet and phone connections, supplies and vehicles. Additionally, you may be able to save money through tax-advantaged retirement accounts such as an SEP (Simplified Employee Pension), Individual Retirement Account (IRA) or Solo 401(k).

    Saving regularly should be practiced by everyone but especially those with unpredictable incomes. By building an emergency savings cushion, you’ll be able to continue working during slower seasons if need be.

    Keep track of your expenses

      As part of budgeting for freelancers, close attention needs to be paid to every expense incurred throughout the year. Consider opening up a separate bank account for your freelance business to make accepting payments easier while giving customers transparent service estimates.

      Neat is great software that allows users to keep meticulous records of their income and expenditure. Generating profit-and-loss statements along with cash flow information based on period/client gives you a better understanding of how healthy your business actually is compared to just tracking expenses.

      A system should be created to ensure that no deduction slips through the cracks during tax season. From mobile apps that let you snap photos of receipts to manual record-keeping methods, many different options exist. Just make sure you stick to whatever system you develop and track everything consistently!

      Set up a savings account

        Savings accounts offer transaction accessibility while growing your interest in a safe environment. They tend to have lower minimum deposit requirements and fees than checking accounts despite offering fewer transaction features and charging higher transaction fees.

        If you perform professional services as a freelance writer, contractor or independent worker for others, creating an individual savings account for each business could help manage expenses and provide documentation come tax season.

        Financial planners typically advise saving enough money to cover three to six months’ worth of living expenses as a cushion in case of job loss or unexpected costs. If this seems daunting, don’t fret—there are professionals available who can guide you through it all. They can set up budgets, track expenses and establish savings goals tailored specifically for your life as well as recommend retirement planning solutions available to self-employed individuals like yourself.

        Keep track of your income

          To achieve financial clarity, freelancers must know when and how their income comes in and out. It’s the best way to prepare for tax season and other unforeseen expenses. Maintaining accurate records is key.

          Aside from diligent note-taking, another way to manage your money is by setting up a separate bank account for your freelance work. There are plenty of shared accounts that make it easy to track expenses too. For example, some will show you your gas bill so you can know what’s eating up your wallet.

          Keeping detailed records puts freelancers in the driver’s seat of their finances. From there, you just need to set realistic goals and open a savings account! Having a handle on your income allows you to take steps towards finding success as a freelancer – plus it means being prepared for anything!

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