How to Keep Track of Your Income from Freelance Work
Updated: Aug 3, 2021
As a freelance worker, you carry the burden of keeping track of your income and finances. Therefore, solid money management skills are a must for enjoying a rewarding freelance career. With this in mind, you must work hard to manage your income effectively. To help you out, take note of these top 5 skills that make managing your freelance income and finances a little less intimidating.
Set and Stick to Budget
Monitoring the income earned from freelance work hinges on having the right budget in place. An effective budget will account for both your income and expenses. Thus, with this at your disposal, you can efficiently track and plan where your money is going. Having a proper budget in place also means you can save up wisely. Remember, your budget is only effective if you stick to it. Thus, routinely assess your budget to ensure you are on the right track. This makes organizing and planning your money so much easier.
Use the Right Digital Tools for Income Tracking
The key to maintaining a good budget is working with the right system that fits your needs. Choosing the right accounting app or software can help you out. Key features to look for include the following details:
Easy to input income and expense tracker
Calculate profits easily
Check existing debts
Issues reminders for payments
Keep Business Expenses and Personal Finances Apart
Whether your freelance gig is a side hustle or a full-time job, you must make it a point to always separate your business and personal finances. So you can monitor your income effectively, keep a different bank account for your freelance work. As a result, you can manage your cash flow more efficiently, especially if you still have a full-time job. Separating things will also prevent you from paying for personal expenses with business funds.
Set Part of Income for Taxes
Freelance means you work for yourself and generate income with your talents. However, this scenario thus does not exempt you from paying the right taxes. Employees don’t have to worry about withholding taxes and the like. However, as a self-employed professional, you must register properly with the BIR so you can issue invoices. On top of that, you must set aside money each month to ensure you can pay your tax dues on time to avoid penalties that will eat away your profits. If this feels confusing for you, using accounting software or seeking professional help will make a big difference so you can prevent tax audits and investigations.
Plan for Prospective Downtime
Effective income management equates to planning for downtime, especially since freelance work is not always steady. Remember, failing to plan is planning to fail. In freelancing, you will find that workload varies. Some months have more clients and workload than you can handle. Other months prove very lean where you barely earn anything. If you want to avoid stress, you must plan your income well to assure peak performance. It will help if you save and set aside reserve funds to cover your basic needs for times when freelance work is sparse. This gives you a lot of breathing room and helps ease stress, even if unexpected expenses crop up.