Working as a freelancer can be financially precarious, making it difficult to plan for your future – and that isn’t limited to retirement. Rather, depending on your professional life’s structure, you may struggle to plan for the next several months. What many independent professionals don’t realize, though, is that it doesn’t have to be that way. With the right tools and strategies, not only can you better predict your financial future, but you can also boost your earnings.
Pick A Tracking Strategy
There are countless ways to track your income, from specialized software to simple Excel spreadsheets to a notebook and paper, and it doesn’t matter what approach you choose. To get started, the most important thing you can do is to commit to a strategy for tracking your monthly income and expenses. Once you have this basic tool in place, you can start assessing your income as well and then set goals for increasing that income.
Account For Taxes
One of the most common mistakes freelancers make is that they fail to account for taxes that would ordinarily be payroll deductions – or rather, they account for them, but fail to set aside enough money to pay them successfully without eating into savings. Remember, the self-employment tax rate is 15.3%, so you need to be setting aside money every month, not just the months that taxes are due. And it needs to be a manageable amount relative to your income so that, even in slow months, you feel like you can comfortably put that money away and pay your bills.
Organize Your Invoices
While your tracking strategy will allow you to see your overall financial situation, you also need to pay attention to individual invoices. This can help you identify particular problems, such as which clients are most important to your financial success, which clients aren’t paying you in a timely fashion, and how you might bundle your services differently.
According to recent research by Freshbooks, 1 in 4 freelancers say that cash flow is a problem inherent in working for themselves, but studying your invoices can help you minimize this issue. In fact, Freshbooks’ invoicing tools, such as their invoicing template for contractors, can help you stabilize your income by ensuring that you’re being paid on time, how your work breaks down, and help you to follow up with clients appropriately.
Aim For More
Many freelancers struggle with income to the point that they’re worried about covering all of their expenses, but the fact is that you won’t earn more unless you aim higher. With that in mind, then, use your invoices to help you scale your up your business. As product design Artem Fedin explains, it helps to have both a pragmatic income goal – one based on how much you already earn and need to cover expenses – as well as a stretch income goal. Your stretch income goal should also be attainable, but would require you to reach just a little further. If you hustle a little extra each month, you could hit that stretch goal this year.
Watch The Market
Finally, if you’re going to take your income to the next level and meet your financial goals, whether that’s paying off debt or saving for retirement, you need to be sure that your rates are competitive. This can be hard since most people aren’t open about their fees, but by networking and scouring the web, you can get a sense of how you compare to similar service providers. Too many freelancers are undercutting themselves by charging too little for their services, so make sure your rates are fair to your clients and to yourself.
Saving money is hard enough without a stable employment situation, but with proper planning, you can secure your financial well-being no matter what kind of position you hold. So pay attention to where your money comes from and where it’s going. Your future depends on it.
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