This article was written by Kat McCue of GoGirl Finance.
If you work as a freelancer, you’ve no doubt grown accustomed to figuring lots of things out for yourself. You set your own erratic hours, you establish your own makeshift mobile work station via couch and coffee shop, you seek your own mentors to help yourself up the freelance ladder. Chances are you’ve figured out the best way to manage your own finances as well, tackling the unique challenges that come along with freelance pay.
No matter what you do to maintain your bank account, consider these three financial tools and ideas that I’ve found are indispensable to keeping your finances on track as a freelancer.
Personal Finance Program
Years ago, a boyfriend of mine introduced me to Quicken’s personal finance software… and when we broke up, I took the CD with me. I’ve been using the program ever since.
Especially since the number on my paycheck is ever-changing, keeping a close eye on my spending habits is the only way I’m able to maintain a balanced budget. A program like Quicken allows me to safely link each of my bank, credit card, and investment accounts to the money management software, where it automatically categorizes my spending, whether it’s money I’ve spent for groceries, entertainment, travel, gas, and so on.
It’s not perfect at the categorization, so I like to go through and refine everything myself, which is also a great chance for me to pore over each transaction. Additionally, I’m able to further tag each of the transactions (for example, “groceries” might either be tagged as “farmer’s market” or “wine store”) which allows me to create a better, more detailed financial picture for myself—literally, the program creates pie charts to illustrate the financial data that I’ve so carefully categorized. Having such a clear awareness of my ever-changing finances makes it super easy for me to adjust my spending habits accordingly.
Another option? Xero’s online accounting software. Used in conjunction with account management service Manilla, you can benefit from more accurate bill reconciliation and seamless document retrieval.
Bonus Reading: Mint.com is a free and web-based version of Quicken (both are made by the same company), which we wrote about here.
Time is Money
When you’re working freelance, it goes without saying that you must manage your own work hours. If you’re paid hourly, you’ll obviously need to keep a diligent log of the time you’ve spent working in order to get paid accurately. If you’re compensated per project, logging your hours is equally important. You’ll be able to calculate an hourly breakdown of your pay, which will give you an idea of how to adjust your priorities accordingly so that you can more efficiently complete projects and decide which ones to take on and when.
I use a free stopwatch/timer app called Timeless ($0.99 for the full version, currently only available for Apple products) to keep track of how many hours I’m spending on each of my projects. The app lets you keep multiple stopwatches running, either simultaneously or individually, and you can label each one to correspond to each project.
Right now, I have two different stopwatches in my phone that are logging my hours for two different projects. Once I‘ve finished working for the day, I’ll transfer the hours into a database (I prefer to use an old-fashioned spiral notebook, but you could use Excel), and when the time comes, I’ll convert my hours into an invoice.
Bonus Reading: Here’s an article I read recently in The New York Times about some economists who are taking the “time is money” concept to the next level.
Create Your Own Retirement Account
The key to investing, as always, is to start early, no matter how small your contributions. Even if you’re not planning on being a freelancer for life, don’t wait around for a salaried position to start saving up for retirement.
Since you won’t have access to an employee-sponsored 401k program, it’s critical that you set up your own investment account as soon as you can. After doing a little shopping around online, I decided to create a Roth IRA with Charles Schwab, with whom I’ve been incubating a little nest egg for a few years now.
There are several different options for freelancers’ retirement accounts: SEP-IRAs, solo 401ks, Roth IRAs, Traditional IRAs… and honestly I just picked the one that I’d read the most about. What I ought to have done is set up a meeting with a financial advisor to figure out if the Roth IRA really is the best option for me. My income as a freelancer is pretty modest right now, but as my career progresses, I want to make sure that my money is in the right type of account for me.
Bonus Reading: Manisha Thakor’s “On My Own Two Feet: A Modern Girl’s Guide to Personal Finance” is a great way to get acquainted with the basics of retirement savings.
More from Manilla.com:
- Game On! Survey Reveals How Women Navigate the Path to Career Success
- 5 Must-Do to Be Seen, Heard and Found
- Is Freelancing For You?
- Personal Finance - Career & Education