A Guide to Financial Harmony

The life of a freelancer offers a great many perks.

For starters, not having a boss is a wonderful thing. You don’t have anyone checking up on you, or staring over your shoulder and you’re gleefully free of the politics that permeate many an office building. You’re free to make a living from your skills entirely on your own terms. Feel like a lie in? You can have one! Feel like putting in some work at night because you can’t sleep? You’ll have less to do when you wake up in the morning. Yet, while freelancing offers great freedom, it also brings with it a number of challenges. Among the steepest learning curves a freelancer must come to grips with is managing their finances.

Bereft of a regular salary, employer pension and other benefits, freelancers must become conversant with the tenets of money management very quickly. Here are some tips to help nascent freelancers stick to the path of financial harmony…


Manage your monthly outgoings

A big part of money management is keeping your monthly outgoings under control both in terms of business expenses and composite living costs. When you’re starting out as a freelancer you may not always know where your next payday will come from or when it will arrive and as such it behoves you to keep your monthly outgoings under control with careful budgeting. Download one of these household budget templates and be sure to stick to it.


If you need to borrow, borrow smart

When faced with erratic income but ever-present living costs, freelancers may feel it pertinent to rely on borrowing and / or credit to keep themselves afloat while they lay the foundations for future growth; building relationships with new clients, investing in new equipment and building their portfolio. However, if you need to borrow it’s important to compare loans and take the time to calculate the cost of borrowing. For example, not everyone knows that interest rate and APR aren’t necessarily the same thing. APR is the composite cost of borrowing and encompasses not just interest rates but any fees and charges incurred when borrowing.


Know your tax liability as soon as you can

When you’re used to paying your tax on a Pay As You Earn basis, saving for your tax liability can seem pretty jarring, especially when your income is erratic. That’s why it pays to keep your profit and loss accounting up to date and ensure that you know your tax liability as soon as possible. You will have a substantial window between the end of the tax year in April and the date by which your self-assessment form needs to be submitted the following January.


This should give you time to calculate your tax liability and save accordingly, although squirrelling away 20% of your income is always a good rule of thumb… And don’t forget to keep track of all your tax deductible expenses!


With a little forward planning, a whole lot of discipline and a level head you can make freelancing a profitable and highly rewarding endeavour!


A Guide to Financial Harmony

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