8 Financial Tips for Freelancers

Working freelance means being prepared to hustle for your next gig, save money to cover late payments, and maybe even becoming a corporation!

We’re going to let you in on a little secret: The “we” who collectively bring you the OppLoans Financial Sense blog have some experience with freelance writing. And that’s how we can definitively tell you that freelance writing—and freelance work in general—is truly a land of contrasts.

On the one hand, you’ll likely have a higher degree of freedom about how you structure your time. On the other hand, your situation will likely be much more precarious. A salaried position might be more restrictive when it comes to your work week, but the regular paycheck and (if you have them) benefits can lead to more financial freedom overall.

That’s why we spoke to the experts to find out how freelancers can even the odds and improve their financial situation.

1. Track your spending.

Everyone should keep track of what they spend. But it’s especially important if you have irregular income, as many freelancers do.

“You should start tracking your spending with whatever method you’re most likely to stick with—write it down, use an Excel sheet, or install a convenient app,” advised Michael Minter, managing partner of Mintco Financial. “At the end of the month, you can view your financial history and determine where you could have saved more.”

And speaking of saving more…

2. Build up your savings.

As with tracking your spending, everyone should have an emergency fund, but it’s absolutely vital for freelancers. You may not always know when your next check will come, and financial emergencies can happen regardless of the whims of your clients’ payroll departments.

“Create an emergency fund so you don’t have to borrow at high rates when an unexpected expense comes up,” suggested Ilene Davis, CFP(R), MBA, and author of Wealthy by Choice:  Choosing your Way to a Wealthier Future. “Put enough into savings to cover two months of bills.”

Lacking an emergency fund is one of the main reasons people find themselves stuck with no credit check loans,  payday loans, and cash advances during times of financial stress. The more you can save, the more secure your finances will be—whether you’re a freelancer or not.

3. Always be outreaching.

When work isn’t guaranteed, you want to create as many possibilities for yourself as you can. You’re essentially always applying for jobs, and as is the case whenever you’re applying for jobs, it comes down to a numbers game. You may have to send out dozens of messages to get one response.

“The most important tip is to market even when you’re busy,” Linda Formichelli, longtime freelance content writer and journalist, told us. “Too often, freelancers do a lot of marketing, get busy with work, and stop marketing. Then they turn in all the assignments and … they have no more work on their schedule. At all. It’s key to carve out time for marketing no matter how busy you are, so you’ll always have money coming in.

“If you’re truly overwhelmed with paying assignments, you might just reach out to old clients letting them know your schedule will be opening up soon, connect with prospects on LinkedIn, or repurpose pitches that never sold.”

But don’t just go harder with your outreach. Work smarter, as well, be prioritizing outreach to some potential clients over others.

“Target clients that will provide work on a regular, repeated basis,” suggested Janet Attard, founder of BusinessKnowHow.com. “These will vary depending on what you do, but if you manage social media for companies, for instance, you’d want to look for companies big enough to need—and be able to pay you—on an ongoing basis for some substantial number of hours of work a month.

“The reason: startups and small businesses that want small jobs done on an occasional basis often take up a lot of unbillable time, partly because of the number of small invoices you’ll need to send out and then make sure you collect. They may also need a lot of handholding.”

4. Don’t shortchange yourself.

You can’t be afraid to make your quote as high as it needs to be.

“Price your services to cover your overhead,” advised Abbey Woodcock, creator of The Business of Copy. “Just because you made $20/hr at your full-time job, doesn’t mean you should price your service at $20/hr. You need to factor in things like payment processing fees, software and tech you maintain, etc.

“Understand your numbers. How much of your fee goes to taxes? What percentage of your time are you spending finding clients? (You don’t get paid for this time so your rates need to cover it). Are you saving for retirement? Do you have a plan for time off/vacations?”

Oh, and speaking of taxes …

5. Tax attacks.

When you’re a freelancer, your client/employer likely won’t be deducting anything from your check to cover taxes. You’re expected to do that yourself. As such, being a freelancer can mean getting hit with a huge bill come tax time.

One way to offset the pain at tax time is to have a separate fund in addition to your emergency fund you can use to prepare for said tax bill. Here’s how Minter put it:

“When you’re self-employed, you’re in charge of sorting your own taxes, the last thing you want is a huge tax bill to hit you by surprise. Put a percentage of your earnings away and don’t touch them, so when it comes to that time of the year, you’re ready with the money.”

6. Go corporate. 

If you’re looking to minimize your tax burden, you could also look into becoming a corporation.

“I’m an attorney, and also work to help businesses get started,” Deborah Sweeney, CEO of MyCorporation.com explained. “We work with many freelancers who are finding it a financial benefit to incorporate (S-Corporation) so that they can have write-offs and put themselves on payroll for FICA tax savings.

“Many freelancers also see the benefit in protecting their personal assets by forming a separate corporate entity under which they perform their business services. This is a great way to protect yourself, manage your assets, and save on taxes.

“Organizing your business structure is also a great way to obtain more business and present a professional business to potential clients and customers. Freelancers give a professional sense about themselves when their business and corporate structure are established.”

Of course, regardless of whether you officially incorporate or not, each freelancer is a business in some sense. And that means…

7. Get your money.

No business can survive unless it is actually getting paid for the services it offers. Which is why, above all else, you need to make sure you’re actually getting paid for the work you’re doing for clients. And, unfortunately, it isn’t always easy.

Paul Gordon, a consultant with the Kinum collection agency, gave us a detailed overview: “Getting paid is a resource-intensive task for most businesses. For most businesses that I work with, providing a convenient way for customers to pay is a critical step in receiving that payment. This generally means an online payment method like a web portal or payment system.

“Also necessary for this is enough communication with the customer to get the customer to take action and pay their bill. One statement every 30 days in a mailbox is a recipe for disaster. Customers with balances due need to be communicated with every few days, using more than one communication channel.

“There is no substitute for acting early for both collecting the amount due and keeping the customer. In order to collect a debt (regardless of how old it is) there are only three ways to communicate with that customer: phone, mail, or the customer comes into the business.

“It is always a good idea to get an agreement on payment in writing and signed by the customer. If the customer challenges the debt with an agency, the agency will typically ask for documentation. A signed agreement carries more weight than a ledger.”

8. Be strategic with your invoicing.

When you’re a freelancer, you’re basically your own collections agency. And while you have to remain persistent, you also don’t want to be so aggressive that the company decides to not work with again. Maintaining that balance will be key.

“If you’re doing work for   or bigger clients, ask, how long they normally take to pay,” suggested Attard. “And be sure you know who needs to get the invoice, so you get paid on a timely basis. If you’ll be doing a big job for a company (ie, something that will tie up a significant amount of your time) ask to be paid in stages. Get money up front to start the job, another payment halfway through the job and the final payment made when you finish the job.

“Send out invoices as soon as a job is done. Don’t wait for the end of the month. The sooner you send out invoices the sooner you’ll be paid. Plus, if you wait until the end of the month you may miss the window during which the company cuts checks for vendors and have to wait an additional month for payment. Consider accepting credit cards. Some customer will pay sooner if they can charge your services.”

Being a freelancer is tough. But hopefully, these tips will help you keep your money on track. To learn more about managing your finances, check out these related posts from OppLoans:

What are your best tips for living the freelance life? We want to hear from you! You can find us on Facebook and Twitter.

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Janet Attard (@JanetAttard) is a small business expert, author, and CEO of the website Business Know-How®.
Ilene Davis is a CFP(R), MBA and author of Wealthy by Choice:  Choosing your Way to a Wealthier Future. She has 35 years experience as a financial professional helping clients create a more secure financial future, better understand investing, and make wealth enhancing choices.
Linda Formichelli is has been a full-time freelance writer and journalist since 1997.
Paul Gordon has worked in both insurance and healthcare industries.  First with insurance, building systems and process for paying health insurance premiums to employee plans to building a call center for all enterprise employees. In healthcare, Paul has been a practice administrator for multi-provider and location practices, responsible for all aspects of practice operations. Now, Paul is helps practices with all nature of operational consulting including, revenue cycle and improved workflow processes.
Michael Minter is a managing partner of Mintco Financial (@MintcoFinancial). He has written a book, been on TV, written articles, spoken at seminars, schools, and colleges. His dream is to reach as many people as he can to teach about a Personal Financial Plan.
Deborah Sweeney (@deborahsweeney) is the CEO of MyCorporation.com (@mycorporation). MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best.
Abbey Woodcock has been a direct response copywriter since 7th grade when she wrote a 30-page sales letter asking her crush to the dance with dismal results. Since then, she’s converted better… writing sales pages and emails you’ve probably read from some of the biggest names online. Now she helps other freelancers build and grow amazing businesses at BusinessofCopy.com.

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