Leaving the world of full-time employment is exciting. After years of being told what to do and when to do it, you suddenly don’t have to answer to anyone. It’s a great step if you’re looking for more independence. However, along with losing the boss who constantly orders you around, you also lose the convenience of having somebody sort out most of your money for you. It’s not the end of the world, but it does mean you have to step up and take responsibility for your finances. Here are a few things you might need to think about.
Remember you need to pay taxes
When you’re on somebody else’s payroll your taxes are basically sorted. You’re sent a tax code and your employer makes sure you pay your taxes. It’s done before you even get your hands on your own money, and everything’s legit. When you’re working for yourself you need to keep track of your own expenses. You also need to make sure you fill out a tax return when Moira Stewart tells you to. And, take it from us, compared to the other bills you have to pay, your tax bill is a big one.
Keep your money separate
As a freelancer you invoice your clients, and they send you all of your money in one go. It’s very exciting. But it does mean that you might be tempted to spend it all at once. Think again. You remember that big tax bill we talked about? It’s a sensible strategy to put a bit of money aside every month. This will cover your tax bill and any other expenses you know you’re going to incur.
Keep your receipts
Part of doing your tax return is knowing how much you spent on business expenses during the year. This information is a key part of your tax return. The Inland Revenue could decide to audit you so it’s important to be able to prove you spent this money. If you go hire an accountant it’s also helpful for them to see the details of your expenditure in front of them.
Find some good invoicing software
Part of being the super-organised freelancer you are now is being able to quickly and easily generate an invoice. If you have a regular client and nothing much changes you can automate these to go out every month. If you have slight-less-regular-but-still-frequent clients you can store their information to make invoicing even quicker. Team HowNow bloody love Wave, if you’re looking for a great invoicing tool.
Plan for the future
If your freelancing is a long-term thing, you need to think about the future. You might be used to having a nice employer provide you with a pension, but that is not something that happens for those out of the realm of employed work (because any current pensioner will tell you that the state pension on it’s own will barely cover a thing). There are loads of pensions you could set up so that you can keep saving for the future, but do remember to pay into it.
Don’t forget you can take other jobs
If you’re working with one main client, it’s easy to forget that you’re a badass freelance type now, and can therefore take on as much work as you please. Of course, you shouldn’t take on more than you can cope with, but your clients can’t complain about you doing extra work for other companies like your old boss might have done.
Freelancing is a changing beast but, like we already mentioned, it’s an awesome way to gain some independence. Keep an eye on your money, and be a little bit sensible from time to time (Boring, we know) and it could be lifechanging.