5 Steps to Managing Your Expenses as a Freelancer
As a freelancer, one of the hardest things to do is manage your cash flow. More often than not, you can’t predict how things will go, whether you will get clients or not, and the imminent day everyone dreads: tax filing. This fear has stopped many people from going fully self-employed but with these simple steps, you can stay in control of your expenses and be more prepared for tax season. Here are 5 steps you can take to manage your expenses. 1. Separate your personal money from your business income Business? You might ask. Well, yes. You need to start treating your freelancing career as a business and not mixing it with your personal money. Putting all your income in one account is setting yourself up for confusion. You can’t tell whether you’re actually making profit or not. What you should do: Open a separate business account. Client payments go there. Set aside some for taxes, pay business expenses, and transfer the rest to yourself. Simple separation means clear finances. 2. Use an expense tracking software It is important that you have an idea of how much your business makes and how much you spend on your business. This is particularly important for you as it would help during tax season. A tool like Spendsa allows you to automatically pull receipts from your email and WhatsApp and presents all your expenses and income in a dashboard you can see anytime. No manual work needed. 3. Create a budget This is very important for you. Create a budget that details how much you want to spend monthly on tools, necessary things needed for your work like electricity, internet, etc. You should also decide how much to take for yourself personally. It is advisable to use the 20-30-50 budgeting rule. 20% for your savings, 30% for your nice to haves, and 50% for your essentials, bills, rents etc. You can also decide to shed your essentials to include your taxes. So, a fair amount of 10% to 20% for your taxes is safe. 4. Have a safety net Being a freelancer means one thing: You won’t always have clients. You’ll have very good days and some down days too. Having a safety net ensures that you have something to fall back on. You can dedicate an account that you don’t frequently use for this. Keep some amount that you can access easily and some that you can only access at a later date. The amount you can save for this depends totally on your income, business needs, etc. 5. Save ahead for Taxes Don’t wait until it’s tax season to start panicking. For every month, remove at least 20% for tax. It is always safe to have more than enough than for you to be caught off guard. Again, Spendsa does this automatically, recognizing and sorting expenses without you lifting a finger. Instead of spending hours organizing, it allows you to track your expenses easily. The more business expenses you track properly, the lower your taxable income so, it is important to take this seriously. You don’t need to be a bookkeeping expert to manage your finances well. You just need to put a system that works for you in place. When receipt tracking is automatic, like with Spendsa, syncing your email and WhatsApp, you spend less time racking your brain with organizing and more time doing the work you actually get paid for. Ready to simplify your finances? Try Spendsa today.
