10 Financial Tips Every Freelancer Should Know

By: Rafal Reyzer
Updated: Oct 6th, 2023

10 Financial Tips Every Freelancer Should Know - featured image

Freelancing sounds like the ultimate ticket to freedom but it comes with a twist—a dash of financial uncertainty. But that shouldn’t be the case if you have a sound financial plan.

We compiled several savvy financial tips every freelancer should know, to assist both newbies and seasoned pros, in navigating the freelancing financial waters. They will help you make your journey not just manageable but enjoyable too, by eliminating, or at least keeping the specter of uncertainty at bay.

Here are the best financial tips every freelancer should know:

1. Tackle Those Priority Debts First

Dealing with financial commitments like student loans? Many, if not most, freelancers struggle with financial burdens such as student loan debt. It is important to prioritize repaying debt whenever possible, even considering refinancing options to help you wiggle out of the debt trap effectively and immediately. When a big commission or contract lands in your lap, consider chipping away at those priority debts. This not only shrinks their impact during lean times but also gets you closer to financial nirvana.

Earmark a portion of your earnings for taxes

One of the most common financial pitfalls for freelancers is not setting aside money for taxes. Often, they find themselves running through unpleasant surprises come tax season.

2. Earmark a Portion of Your Earnings for Taxes

As a freelancer, you will probably handle your taxes, and before you’ve completed your tax return it’s hard to know how much you’re going to owe your government. So it serves you well to set aside a chunk of your earnings with each paycheck to dodge any tax season surprises. Make sure the portion you stashed away is at least equal to the rate of income tax for someone in your income bracket. It’s better to be safe than sorry, right? However, you should also take note of your deductibles, as you are entitled to deduct operational expenses in declaring your net income. This will help reduce the amount you need to remit to Uncle Sam, or whoever is the figurative taxman figure in your country. You may also want to use bookkeeping or accounting software or an online app to automatically compute your taxes.

3. Build an Emergency Fund

For freelancers, income can be as unpredictable as a soap opera plot twist. That’s where emergency funds swoop in as lifesavers. Strive for 3-6 months’ worth of expenses tucked away for a rainy day—it’s the financial security blanket you’ll thank yourself for later. It might take some time, but it is worth doing when you can. If ants and squirrels can stash away food to sustain them through rainy months, then so can you!

4. Diversify Your Income Streams

Clients are like flavors; having just one can be a bit bland. We all have our favorite (and less favorite) clients, but relying on just one is a risk we cannot afford to take. Diversify your client base and income streams to keep the income train chugging in various directions. When one carriage slows down, the others can keep rolling. For example, let’s say you are a freelance copy editor, you might also consider taking data entry jobs or a virtual assistant position from other clients.

Financial tips every freelancer should know: Keep track of income and expenses

Monitoring your income flow and expenses will give you a clear picture of your financial health. Don’t take it for granted.

5. Track and Review Your Income and Expenses

Keep tabs on your income and expenses like a seasoned detective. There are many nifty income and expense-tracking apps out there. Find one that suits your style and offers regular reviews to spot and nix any unnecessary costs. We are not endorsing any app or service provider by name, but we suggest that you do your due diligence before employing one. Visit online forums and check customers’ reviews before making your decision.

6. Invest for Your Retirement

No employer? No problem. Even though you don’t have an employer-sponsored retirement plan, you can set up your own. You can turn your eyes to an IRA or solo 401(k) to help secure your financial future. It will be like a gift from your freelancer self to your retired self. When your mind is not as sharp as before and your eyes start to grow dim, you will thank yourself for being prepared for your golden years.

7. Avoid High-interest Debts

Those pesky high-interest debts, like credit cards, can snowball into a financial avalanche. It can be crippling. Pay them as soon as you can to dodge mounting and compounding interest. If a consolidation loan comes knocking with a lower interest rate, open the door—it might be your ticket to financial freedom. They almost always offer much lower rates than credit card providers.

Financial tips every freelancer should know: review your financial goals

Setting your sights on a clear financial goal will not only set you on your path, it will also help motivate you to work harder and smarter.

8. Review Your Financial Goals

Yes, you can manage your finances as a freelancer and prepare for your future. But you need to have clear-cut goals. Set specific financial goals, like a savings target by a certain date or becoming debt-free by a milestone. Along the way, schedule regular check-ins to ensure you’re cruising down the right financial highway. Having a clear goal will help you visualize and direct your efforts and resources to your target, which is financial freedom.

9. Consider Getting a Health Insurance

Health insurance may seem like an expense, but it’s also your financial safety net. Alas, freelancers lack convenient employer coverage, but it doesn’t mean you can’t manage to get one yourself. You can! Consider even a basic plan that covers emergency room visits and essentials. Your future self will thank you for this essential investment in well-being.

10. Think of Ways to Invest in The Growth of Your Business

Remember that sometimes, the best way to secure your financial future as a freelancer is to spend more money. If you don’t use your active capital and keep it locked in your bank account, its value will quickly deteriorate. That’s why it’s necessary to constantly think about ways, in which you can grow your business by strategically spending on growth opportunities. It might mean expanding your team, getting your hands on a new laptop, investing in a hot desk in a cool co-working space, or trying our software that will maximize your productive output.

Wrapping Up

Navigating the freelance financial landscape doesn’t have to be a daunting quest. With these financial tips every freelancer should know, we are confident that anyone can transform uncertainty into opportunity. From taming debts to stashing away for the future, diversifying income streams, and embracing smart financial habits, you can enjoy the freedom of freelancing while staying firmly in control of your financial destiny. So, go forth, fellow freelancer, be armed with these tips and forge a path to financial success and peace of mind. Your freelancing journey just got a whole lot brighter. Next up, you may want to explore a guide to financial book publishing companies.

Rafal Reyzer

Rafal Reyzer

Hey there, welcome to my blog! I'm a full-time entrepreneur building three small companies, an educator, digital marketer, freelance writer, editor, and content manager with 10+ years of experience. I started RafalReyzer.com to provide you with great tools and strategies you can use to become a proficient digital marketer and achieve freedom through online creativity. My site is a one-stop shop for writers, digital marketers, and content enthusiasts who want to be independent, earn more money, and create beautiful things. Explore my journey here, and don't miss out on my AI Marketing Mastery online course.