When you are a freelancer rather than the employee of a company or another person, you find yourself with a great many more responsibilities than you would otherwise. Among these many responsibilities is your finances and your short-term and long-term financial planning. All financial obligations fall on your shoulders as a freelancer, and you do not want to make any missteps that could cause you trouble in the future. Get to know some of the steps you should take to plan your finances as a freelancer so that you can be sure you are financially sound now and in the future.
Invest In Good Financial Planning Software
The first step in making sure that you are taking the best possible care of your finances as a freelancer is to get yourself a good and comprehensive financial planning software to use. You want to be able to keep track of all of your finances including your income and business-related bills, personal bills, and savings and retirement funds.
All of this can be tough to keep track of if you do not have software that is easy to use and that can integrate all of these different financial records into one easy to navigate system. While getting the software you need to track all of your business and personal finances may represent a significant up-front investment, the payoff will be well worth it. It will uncomplicate your finances and make tax season much simpler.
Set Money Aside For Taxes
Speaking of taxes, when you are a freelancer, the biggest financial shift that you will need to be prepared for is the fact that you are solely responsible for the taxes levied on your income. This means that you will be responsible for both the employer and the employee portion of your taxes. And taxes are not automatically taken out of your freelancing income. There is also a self-employment tax that you will need to account for as well that you will owe in addition to the standard income tax amount.
As such, you will need to be diligent about setting money aside for taxes every time you receive payments or your freelancing services. You can work with a tax professional to determine the percentage amount you should set aside each payment or you can set aside between 25 and 30 percent (a common estimate) for tax purposes.
Now that you know a few of the financial planning steps that you can take when you are a freelancer, you can get started and ensure that you take the best possible care of your finances now and in the future.
For more information, talk to a financial planning company like Wealth Trace.