It may seem like a foreign concept to some, but for freelancers and self-employed individuals, budgeting is crucial.
That means you must learn to manage a business budget and a personal budget.
“But I need to get my business off the ground!”
I’m sure you do. However, neglecting to keep your personal finances in check in favor of focusing on your business finances can create more chaos than calm. While it is difficult to manage, especially when you may not be receiving consistent paychecks, it is more than worth it in the long haul to make a business budget and a personal budget and stick to them both.
“But where do I start?”
Easy. Start by having separate accounts. That means one for business, one for personal. It can be easy to lump everything into one account and pay out from there, but you’re really just creating more work for yourself.
Here are just a few benefits of having two separate accounts:
Speaking of paying yourself, make sure you do it once, then make sure you do it again.
“Pay yourself first.”
We’ve all heard this. This is nothing new. But as a freelancer or business owner, you have to do this twice. That means cutting yourself a paycheck, then putting an amount of that payment into savings. Sometimes, this is easier said than done. It’s very easy to feel like you don’t have enough money to save, let alone afford rent, taxes, and fun things like eating and paying the power bill. But learning to save, even if it’s only a small amount, can help reframe the way you think about your personal finances. If you only save $20 your first month, great! That’s $20 more than you had at the beginning of the month.
As your clientele grows and your paychecks become (hopefully!) heftier, then you can start to save more each month. But don’t feel like starting small is failure. You gotta start somewhere, even if it is with only 20 bucks.
Now let’s circle back around to everyone’s favorite topic: Taxes! Woo!
Yeah, I know, we all hate them. But I cannot stress this enough. MAKE SURE YOU ARE SAVING FOR TAXES.
If you’re like me and moved from a salaried job to freelancing, then you know how hard it can be to train yourself to save for taxes, especially when you feel like you can barely make ends meet. The general rule is set aside 30 percent of each paycheck for taxes, just to be safe. You could end up paying less than that, but better safe than sorry. And hey, if you end up paying less, then you have a little extra money to put into savings at the end of tax season. Woo!
Still need a little help? I figured you might.
Use the Rule of Thirds. Simple enough.
Now you can tweak this as you see fit and to fit the financial needs of your business. But remember, always pay yourself first and always set aside at least 30 percent for taxes.
Got any tips and tricks for keeping your finances in check? Let us know in the comments below!