From sorting your taxes to starting a pension, managing your money as a freelance writer can be daunting. But you don’t have to go it alone! We’ve come up with five top financial tips for writers to help out. To keep on top of your finances:
- Set yourself a monthly budget and stick to it.
- Keep your business and personal finances separate.
- Do some research into tax and set aside money each month.
- Consider setting up a savings account and pension.
- Use accounting software to make managing your money easier.
Read our simple financial tips for writers in full below.
1. Set a Budget
As a freelancer, your income may vary from month to month. And this makes it especially important to set a realistic and effective budget. This means:
- Reviewing your monthly income over the past months. This will give you a sense of your average earnings and a target for each month.
- Tracking monthly business and personal expenses.
- Setting a spending cap so you’re not tempted to overspend during months when you earn more than usual.
- Planning major one-off expenses. This might not always be possible (e.g., if your computer breaks and you need to buy a new one in short order). But you can budget for things like vacations and business trips.
This will help you to save, plan, and avoid overspending.
Make sure to regularly review your budget, too. You can then tweak it accordingly, helping you to manage any fluctuations in earnings.
2. Keep Your Finances Separate
Most accountants advise having separate bank accounts for your personal and business finances. This is because it makes it easier to keep track of your income and expenses. This, in turn, will help you get your taxes right.
Keeping personal and work finances separate also means you are less likely to accidentally spend money needed for a business expense, such as tax.
3. Understand Tax
Tax is probably the biggest headache for anyone who is self-employed. The first step is to familiarize yourself with your local tax laws. You should also be aware of:
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- The dates that you need to file your returns and pay taxes.
- What expenses you can claim back in your tax return. This may include computing equipment, word processing software, work-related travel expenses, and even a percentage of your rent and utility bills.
- How taxes work if you have another source of income (e.g., if you are also employed in another job or you have a separate business).
It’s also wise to set money aside every month to cover taxes. If you do this, you can be sure you’ll have the funds to pay your taxes when you need to.
4. Savings and Pensions
When your pay and workload can vary, it is important to have a safety net. If you can afford to, it thus makes sense to put a little money into a savings account each month. This can offer a little security if you need to take time off at any point, as well as ensuring you have something set aside for unplanned expenses.
You should also set up a pension if you don’t already have one. If not, you will be missing out on important security for later life if you don’t set one of your own up.
5. Use Accounting Software
Finally, accounting software can help you manage your finances by letting you track income and expenses, generate invoices, and even calculate your taxes.
Some accounting packages charge a subscription, but many offer free access to a basic version. The best option for you will depend on your needs, but popular apps like FreshBooks, Xero, and QuickBooks should offer the features you need.
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