Stable finances are an integral element of successful freelancing. If you’re trying to turn a side gig into a full-time contractor lifestyle, you need to have a stable financial system in place.
This is especially true if you want to work from anywhere in the world. Embracing the geographic freedom that comes with freelancing can be a wonderful experience — but it needs plenty of funding to maintain over time.
Here are several financial tips that can help you protect your finances, whether you’re freelancing, living as a digital nomad, or both of the above.
It doesn’t matter if you’re on the road every day or you spend your life working from a home office. A remote worker absolutely needs the right digital tools at this point.
This doesn’t just apply to the work that you do, either. It can also impact how you manage your finances.
If you want your freelancing financial activity to succeed, you must find quality digital tools to help you. For instance, a quality banking app can allow you to set up direct deposits, transfer funds, and generally avoid trips to the bank as you manage your finances each day.
Every freelancing situation is different, and you need to discover what financial tools will work best for you. The important thing is that you stay open to the idea of integrating digital elements into how you handle your personal freelancing finances. That way, you’re always a click or swipe away from your funds.
Along with accessing your money, you also want to consider how you can keep it safe. This is particularly important if you work out of your home. For some, this could be heading to the local coffee shop. For others, it could be logging onto your virtual workspace from a cafe in Mumbai.
Regardless of the location, if you move around as a digital worker, it’s important to create safety protocols for yourself. These can keep your financial activities protected from any unsavory interference.
Start with basic safety activity on your devices, such as:
In addition to these basic activities, you should also be careful not to recklessly log onto your online financial apps while you’re on public Wi-Fi. One way to do this is by using a VPN to encrypt your activity. Another option is to set up a private hotspot for yourself using your phone.
A disorganized workspace translates to a disorganized mind. It can also have nasty repercussions in the form of overdue assignments, missed invoices, and even forgetting to bill for work that you’ve already done.
If you want to protect your finances, you must make an effort to stay organized. There are many ways to do this. For instance, you can find a good commitment tracking system (CTS) like OmniFocus that you can use to gather all of your open-loop commitments. Another option is to use a workflow platform like Trello to track work assignments, deadlines, and meetings as Digital Freelancer .
It’s also important to keep your job-hunting toolkit organized. This can directly impact your finances if you find that you aren’t ready to apply for more work at any given moment. Your toolkit should include:
By keeping these three items updated and ready to go, you can rest in the fact that your finances will continue to flow in, no matter what happens down the road.
Taxes are a tricky business for freelancers and digital nomads like Digital Freelancer. For the former, if you’re a contractor, you basically own your own company. While there may be a certain simplicity to working for yourself, there are still many legal responsibilities that a solopreneur must face.
For instance, it’s up to you to track your income and expenses. You also have to pay quarterly estimated tax payments throughout the year. These are simple tasks when you break them down, but they must be tended to, nevertheless.
Digital nomads have the added complication of working in different locations. This can impact tax-related items, such as where you claim you live and where you earn your income.
It’s wise to find an accountant that you can trust as you sort through all of the legal responsibilities that come with freelancing and digital nomad lifestyles. This allows you to rest in the knowledge that you’ve dotted all of your “i’s” and crossed your “t’s” every time April 15th rolls around.
Insurance is another area that is often overlooked by freelancers. As a business owner, you can’t expect your clients to provide insurance options for you.
Instead, you must figure these out for yourself. If you don’t, it can seriously impact your financial security for Digital Freelancer. For example, if you’re travelling and you get injured, you may have to pay an exorbitant medical bill due to a lack of health insurance.
The risks don’t stop with health, either. There are several insurances that all freelancers should consider purchasing:
Insurance is a financial factor both as an expense and an added layer of protection. As such, it’s important to address how each of the above (and any other forms of insurance) can impact your financial security.
When it comes to how you actually manage your finances, there are several ways that you can guard against any potential monetary misfortune. The first is by maintaining your business’s finances completely separate from your personal finances.
This starts with opening up a bank account that is exclusively for business activity for Digital Freelancer. Use it to get paid as well as to make work-related purchases.
Having a separate business account can help you properly track things like income, expenses, and your actual profit. It also provides an extra degree of separation between your business and your personal life. This can help protect your finances if things go south with your business at any point along the way.
As is the case with taxes, you can recruit some help for this part of your financial journey if you have the funds available. If tracking all of your freelancing financial activity feels exhausting, consider hiring an online assistant to help you stay organized and on top of everything.
The way you pay yourself is another critical financial activity that can secure your finances. Freelancing has a tendency to lead to a feast or famine income cycle. One month you might make double what you need, and the next your income could drop to nearly nothing.
One way to balance this vacillation in income is by setting a strict budget to pay yourself each month. Start by estimating the amount of money that you typically make in a year of freelancing. Once you’ve done that, divide the number by 12 and pay yourself a significantly lower amount than that each month.
As an example, if you’re working as a virtual accountant, you probably make around $57,525 per year. Dividing this by 12 months comes to $4,793.75. Round this down to a clean $4,500 and you have a consistent paycheck that you can give yourself every month. What’s more, each time you cut a paycheck, you’ll likely have an extra $200 to $300 to spare — which we’ll discuss in the next section.
Finally, once you have your financial infrastructure in place, there’s one more thing you should do: create lines of emergency funding. Even the best-laid plans have a tendency to fail. By setting up additional lines of emergency funding, you can ensure that you have money to pay the bills each and every month.
This should start with an emergency fund. As you begin to pay yourself a restricted or “artificial” salary that is below your means, use the extra money to build up an emergency fund for yourself. Over time, this should be able to grow to two or three months’ worth of pay. This can be a great way to protect your finances against any temporary lull in income.
In addition, there are many other ways that you can secure business funding as a freelancer, such as:
While these aren’t ideal, they can be helpful to have on tap just in case you need a financial leg up on any given month.
There are many considerations that go into operating as a successful remote worker. Protecting your finances should always be high on the list of priorities.
The good news is that there are many ways to establish your financial independence, even if you don’t have a giant corporation backing you up. Utilize digital tools. Set up safety protocols. Separate your business and personal finances. Address insurance and taxes.
If you can keep up on nitty-gritty financial activities like these, you can create a safe and healthy financial framework to support your professional lifestyle …no matter where it may take you in the future.
Author Bio:-
Indiana Lee lives in the Northwest and has a passion for the environment and wellness. She draws her inspiration from nature and makes sure to explore the outdoors regularly with her two dogs. Indiana has experience in owning and operating her own business. Feel free to follow her on Twitter @indianalee3.
Featured Image Courtesy: Pexels
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