Being self-employed is a fantastic way to improve your work-life balance. It allows you to work according to your own schedule and take as many days off as you want. You can pick and choose the clients or companies you work for, and you can work from wherever you want, whether it’s your own home, your favorite coffee shop, or a beach in the Caribbean.
It doesn’t matter what industry you work in – whether you’re a graphic designer, a copywriter, or an outdoor instructor – freelance workers have been shown to enjoy better mental health as a result of their improved working conditions. After all, there is no stressful rush-hour commute, office politics, or micromanaging bosses to contend with.
But that’s not to say it’s all fun and games. One of the frustrations of many self-employed people is the requirement to manage your own finances. When you work as an employee, you have your monthly wages deposited into your account, with all the deductions for taxes and pensions helpfully calculated already. But as a freelancer, you have to pay your own taxes every year.
For those just entering the freelance world, this can be a nerve-wracking prospect. If you’re not a qualified tax accountant, how can you be sure you won’t make a mistake that’ll cost you money or worse, have the taxman knocking at your door?
To help you take the stress out of your taxes, here are three tips for self-employed workers to manage their finances.
Create a Budget
As a freelancer, there’s a good chance you won’t be earning a consistent income every month. If your line of work is seasonal, you might be raking it in during the summer time, while seeing the work dry up in the winter months. You don’t want to get to December and realize you haven’t got enough saved up to get you through Christmas. Creating a monthly budget will give you a better overview of your finances, and help you maintain some discipline to ensure you don’t spend beyond your means.
Keep Track of Your Expenses
Working for yourself, you can claim back tax on any business-related expense, from stationery and software to fuel and food costs incurred on the road. But if you get a visit from the tax office wanting to look at your finances, you’re going to need evidence of all of these payments. Make sure you keep the receipts for any business expense and store them safely away where you can access them when needed.
Consider Hiring an Accountant
When you first start going freelance and you only have a handful of clients, managing your finances is relatively easy. You can just keep your income and expenses in a spreadsheet and keep track of it this way. But as your workload grows and becomes more complicated, it is easier to make costly mistakes. That’s why it’s always a good idea to consider hiring an accountant to take control of your bookkeeping. They will help you keep your money in order while identifying opportunities for reducing your tax that you may have missed. Although a good accountant will come at a price, the best ones will always save you more than they cost.