Many corporate employees imagine that freelancers can take a vacation whenever they want, pick up a friend from the airport at midday, or spend the whole night at the club and not suffer the consequences.
However, being a freelancer does not mean doing whatever you want. Freelancers should please their customers who drive them crazy. They must fulfil all the requirements, even if those tasks aren’t common sense. If the freelancer does not do everything possible and impossible to make the client happy, they run the risk of being left without money.
And, if you are a freelancer, you understand this concern while your biggest concern is money. After all, you can’t have a stable salary (freelancing and stability are incompatible). And yes: freelancer is always thinking about how to pay bills all the time.
Here are five tips from Personal Money Service for coping with the concerns about finances:
1. Check what spendings are deductible
If you run a freelance business or work remotely, there is good news. You can deduct some expenses from your taxable income, which will diminish your tax liability.
Tax-deductible business expenses may concern travel, advertising, office furniture, auto mileage, computers, supplies, insurance or software. Even if some of these expenses are partly business or partly personal, you can divide them in a proper way and deduct the business portion. To get acquainted with all the potential tax deductions, talk to a professional tax accountant.
2. Claim the home office tax deduction
Much like faxing in 2018, paying the correct tax via HMRC’s website can feel like navigating an impossible terrain. But claiming the home office deduction is easier than you’d assume. This is the way to make some spendings, such as rent, insurance, utilities, and mortgage interest partially tax-deductible.
To qualify for this deduction type, you must regularly take advantage of your home for business purposes, like a detached garage, free bedroom or any other identifiable space. The Internal Revenue Service also requires your home to be the main place of your business.
If you are a company employer, but work from home, you should meet one more requirement: this working model should be comfortable not for you, but for your employer. For instance, you can work from home, because your company has no free room in the office.
3. Order your finances
It is difficult to manage your finances without counting them. While your income can grow and fall, bills and taxes are usually fairly constant. Create a budget for expenses for the coming calendar year and split it up by months. Try to adhere to the least possible costs in case your income falls at some point, or in case of the unforeseen expenses. As for taxes, it is better to overestimate their possible size than to be put in the position where you can’t repay a debt to the state.
If you want to exclude an item of expenditure, arrange the items in the list in descending order: from the most important to the least significant. This will allow you to understand what to spend money on, and on what you can save money.
4. Think ahead
Not all of your clients will pay on time. Agree on payment several weeks or months in advance to feel confident about the future.
5. Get insurance in place
Freelance work allows you to work on various projects. But if something goes south, you could have problems if you do not have the right cover. Independence brings responsibility. Stay safe, kids. Ask yourself these questions:
- Will I have money if I am sick?
- Is my spouse employed at my company?
- Do customers attend me at my home?
If your answers are mixed, you should consider making some insurance. Discuss it with the insurance specialist. He will recommend you the suitable insurance type. Have inner peace when working independently.
Remember that you are not the only freelancer in the country, so there are many advise organizations, that help flexible workers like this union for freelancers.
6. Pension investment
Create a plan for your retirement today. The sooner you start investing in your pension, the more opportunities you will have in the future. This will prepare you for that moment in your life when you don’t want to or cannot work.