How to Manage Finances When You Freelance or Contract

Facing the Reality as a Freelancer

There will be times when the phone just stops ringing or the leads stop. When this happens, it can be easy to doubt yourself and wonder if you are really cut out for contract work.

The stress of unstable income is sometimes too much to handle. Occasionally people decide that they would rather go back to the regular workforce and be an employee. However, those who have freelancing in their blood thrive working as independent contractors.

If you’ve made the choice to freelance, it’s important to know how to manage finances as your freelancing career grows.

Seek a Professional

Get professional advice from a CPA to establish your business. Talking to the right people will help you establish a good understanding of your needs and the best processes for your recordkeeping.

Set a Budget

Always keep a budget to avoid dangerous shortfalls. From a business standpoint, watch your overhead — you must be able to cover the cost of goods or services sold so that you don’t end up losing money.

You can use a spreadsheet with a new page every month to track your finances. Using a spreadsheet will help you strategize plans to eliminate debt while projecting expenses and revenue.

Learn to Understand Financial Statements

Develop systems for tracking your finances to eliminate stress. Record each transaction in order to generate accurate financial reports.

Save Each Month

Because freelancers don’t have a stable income, it’s important to develop a financial plan that includes saving a portion of your income on a monthly basis. Doing this helps you be ready when bills arrive.

Pay Your Bills on Time

Take care of your credit rating as a freelancer. A high credit rating will allow you to obtain a loan or access a line of credit if you need it.

The better you manage your money as a freelancer, the more you can enjoy your career in the years to come.