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We all experience money issues and times when money gets tight can happen to all of us. That’s especially true for the freelancers and the self-employed of the world. Now, self-employed life is not all that it is cracked up to be, sometimes. Yes, you might be your own boss (on occasion), and you might have the world at your feet, but you are responsible for a lot. You’ll also have to manage your own finances at all times, and you might not be able to count on reliable monthly pay and income. You won’t have company benefits, you will have to handle your own pension, and you will have to sort all sorts of other things out if you go down the freelance or self-employed route.
There are plenty of financial woes that you can run into when you start freelance work, and more often than not, you can make things worse through your own actions, or inactions. That’s why we are here, to steer you clear of them, or at least help you out when the time does come.
One of the biggest things that you need to consider when you are your own boss, is tax. Tax is the biggest financial pitfall that faces the self-employed. When you are a freelancer, you are responsible for a lot of things – that includes completing the correct tax forms and filing them to the correct authority on time. If you make mistakes with your tax, they can and will cost you. Sometimes, it might put you out a week’s earned wages, and any freelancer will know that every completed project takes time – you do not want to waste money and you especially do not want to spend money on tax fines and sanctions. What’s more, in serious cases of tax evasion, you could be prosecuted and jailed. Not a good look. If tax is beyond you, pay for an accountant who can help you out and do it for you. What’s more, accountants can actually help you out a lot when it comes to your tax allowances and expenses, to make sure that you not only pay your tax, but also pay the right amount. That means one thing – save your receipts so you can get a few tax breaks when you need them!
Tax isn’t the only thing you need to send off when it comes to money and freelancing, because you’ll only get paid if you send off an invoice. Always ensure your invoices are accurate, easy to understand and arrive with payment terms included, so that your client knows what they need to do to avoid breaching payment terms. A fancy invoice might not be able to be processed by your client, so keep it simple and with the information that is needed. Put the work you’ve done, the cost of the work, your contact information and your banking details – and make sure all of this is correct.
Even then, a big woe of freelance life is that it is not perfect regarding payment. Clients will not always pay on time, and honestly – you might not be able to guarantee any kind of payment at all in some circumstances. A good idea would be to research all your clients before you take on work with them, because any clear history of unpaid invoices with them could be a red flag. In severe circumstances, you’ll have to get some aid. Debt collection lawyers can help you recover your unpaid invoices, but it’s always worth chasing payment before you seek help. It can be a long and protracted process. Always network with other freelancers to get the dirt on clients, because bad clients are bad for your business. Being short of cash because of this is a common situation for the self-employed, but worry not, you can get help with loans and credit cards. Just do not rely on these to bail you out at all times.
If you are relying on credit cards and payday loans to see you through to your next paycheck, you could easily run up debts. This is unavoidable if invoices are not being paid, but don’t make a habit of racking up high bills. Debt is something that will kill your business, so don’t stop chasing invoices up, at all, your business is going to rely on it.
There are plenty of freelance financial woes. Stay away from making these bad mistakes and cash headaches, and you might enjoy your freelance life.
