There are countless benefits when working for yourself, this also means that you should bear the burden of additional financial responsibility. No more work-provided health insurance, retirement plans, or W2s. It is a learning curve, but with the right knowledge on your part and the help of an accountant to guide you through your first year, you may just be able to explore it. 5 Finance Management Tips For Freelancers.
There are five essential pieces of advice to begin the journey to manage your finances as a freelancer.
Buy health insurance
As a freelancer, you will be responsible for finding and providing your health insurance from the market. This can be quite expensive, so you can choose more economical options, such as HMOs. Known when open enrollment periods begin and end, and use sites like Healthcare.GO, filter to get out of there.
Keep in mind that insurance plans with cheaper premiums may have astronomical deductions and co-pays, so read the fine print and seek the help of an insurance broker if you are new to the process.
Save for taxes
You have to deduct your taxes from your check-in freelance work. Just because you work for yourself does not give you a discount. You have the option of making payments once a year or quarterly. If you make very little, you want to make quarterly payments to help break down payments. This is first of 5 Finance Management Tips For Freelancers.
The best way to combat this is to set aside a small percentage of each check you receive for taxes. That magic percentage can vary depending on your income and circumstances, but it usually does not need to exceed 30 percent.
You do not want to come in the tax season and are not able to afford your taxes(finance). Consider ahead of time to avoid this problem.
Save for retirement now
Retirement can go a long way. However, as most will tell you, it comes much faster than you would imagine. Now you can save for retirement. You can do this independently, but it requires a lot of financial self-control. Instead, it is best to set up a retirement account. Now, many different individual retirement accounts are available.
Roth IRA accounts are a popular option, as they invest your money for you. The dollars you put into this account are taxed, but when you are ready to retire these funds become easier and easier to access.
Traditional IRA accounts are attractive to some freelancers but come with further limitations. With a traditional IRA account, the money you levy is not taxed, but you are penalized if you withdraw it before the age of 59.
Finance Management Tip: Save when work is slow
You’re going to hit slow times, and you just can’t wait for them. When things slow down from nine to five, your job security remains. This is not the case when you are finance freelancing. Budget carefully for slow periods, and be sure to maintain emergency funds at all times.
A slow period can occur at any point. Knowing your living expenses, it is important to be prepared for that shock, and to save two months’ worth of living expenses at any time.
Set up finance
Keep an eye on your expenses throughout the year so that you are ready as soon as the tax season arrives. Your office location (even if you work from home), office supplies, and benefits can all be tax-deductible. Consult with your first-year tax advisor as a freelancer so that you know exactly what expenses may qualify.
Be sure to create a clear spreadsheet and save receipts. Without proof of your expenses, the IRS will not reimburse you.
There are many benefits to being a freelancer. You work your hours and get to take the work you want to do. However, you have to cover the cost of personal expenses. When you’re ready to retire, follow these tips to help keep you stable in the future.