A Freelancer’s Guide To Expense Tracking & Budgeting
Unless you’re a freelance accountant, independent contractors typically aren’t knowledgeable about money matters. We know how to make it, and oftentimes, we know how to use that money to scale. However, it’s rare that freelancers know how to keep track of their finances.
In this article, we’ll teach you how to track your expenses, make a decent budget, and keep some money on deck for a rainy day. That way, you’ll get more out of your paydays!
A Short Guide for Freelancers About Money Management
If you play your cards right, blogging can be a full-time job. But, the only way to make money (and keep it) is by understanding the rules of money management, budgeting, and tracking.
Keep a Close Eye on Your Expenses
Expense tracking is essential for any freelancer, as it helps monitor income and plan potential investments. Taking precise notes of your spending habits and patterns can provide invaluable insight into how to make the most of limited resources and create a dependable budget.
Since your funds are often limited when you’re a freelancer, it’s important that you keep a close eye on your finances with the help of a spending tracker app. You can enable notifications that inform you if you’re overspending that month or if an unfamiliar transaction is on your account.
Stay Organized with a Business Account
The best way to manage expenses as a freelancer is by taking accurate notes of all transactions made throughout the month, no matter how small they are. Take some time each week to record every purchase you make. Or, you can simply open a business account.
With a business account, you ensure that your personal and business expenses remain separate, which is a godsend during tax time. As a freelancer, you will likely receive a 1099-NEC or 1099k tax form so being adequately prepared is paramount. To make tax time even simpler, keep all of your invoices and financial documents in an encrypted folder on your computer for easy access.
Invest in Yourself and Your Business
Freelancers are often preoccupied with the “here and now,” which makes sense considering how volatile their work can be. However, it’s important that freelancers prepare for the future for two reasons: they’re more likely to scale (and survive) and much more likely to save money.
Every time you get paid, set some money aside for your business costs and write these costs off, if possible. There are 16 tax deductions and benefits for the self-employed, so you can keep more money in your pocket if you track things like utility spending and mortgage payments.
Create a Budget (and Stick With It)
Money-saving tips are all good, but the most important one, and what truly defines a successful freelancer, is budgeting. Setting a spending limit based on your budget can force you to make conscious decisions and cut out unnecessary expenses that help you reach your financial goals.
Budget planning apps can provide personalized advice on how to plan expenditures as well, but if you’re new to budget, consider hiring a financial specialist. They’ll really come in handy if you have multiple streams of income or you’re a full employee with a part-time freelancing gig.
Small Changes Make a World of Difference
It’s important to remember how much of a difference small changes can make when it comes to saving money and reducing expenses overall. For example, switching out store-bought lunch boxes for homemade, nutritious foods can save you hundreds or thousands of dollars a year.
Keep in mind that what you don’t do can also have an impact on your wallet. For example, if you sit at a desk all day and don’t exercise, you’ll increase your medical bills. Make sure to focus on your physical and mental health to avoid unexpected medical fees or impromptu sick days.