5 Tips For Managing Your Money as a Freelance Writer
Can I be honest for a minute? I love talking about ways to make more money as a freelance writer.
But managing my money effectively? Not so much my favorite subject -- and this is coming from someone who writes about personal finance for a living!
Like most of us, I never learned how to manage my money growing up, so I had to figure all of that out as an adult.
But what I’ve learned over the years is that if you can’t manage your money well, then it doesn’t really matter how much you earn. You’ll constantly be wasting it and creating financial problems for yourself.
So this blog post is all about how to manage your money effectively as a freelance writer.
But I want to issue a quick disclaimer first -- I am not a financial planner or CPA. I can offer general tips based on what has worked for me, but that’s really it.
Okay, now that we’ve gotten that out of the way, let’s talk about managing your money!
How to manage your money as a freelance writer
One of the biggest things new freelancers need to wrap their heads around is the fact that you’re a business owner.
When you’re writing, you can put on your artist hat.
But when you’re done writing? You need to start thinking like a business owner, and managing your finances like a business.
Let’s look at five tips to help you get started.
1. Hire an accountant
If you’re looking for one tip to take action on then let it be this one -- hire an accountant.
I recommend finding an accountant who specializes in small businesses and meeting with that person quarterly.
You really can’t afford to skip this step.
An accountant can help answer questions for you like:
How much do I owe on my estimated quarterly taxes?
Are there any deductions I should be taking advantage of?
Should I register my business as an LLC?
How should I start saving for retirement?
Please do not spend your time asking these types of questions in Facebook groups or in the comments section on blog posts like this one.
At the end of the day, few people are qualified to give you that kind of advice. So go find someone who does!
2. Open a business checking account
One of the biggest mistakes new freelancers make is failing to separate their business and personal expenses.
It’s going to be really challenging to manage your money if you’re throwing everything in your personal checking account.
And setting up a business checking account can be as easy as opening a PayPal Business account. Personally, I just went to my local bank to set up a business account.
When I log in to online banking, I can see my personal checking and my business checking in one place. I can easily transfer my income over on the 1st of the month.
But the accounts are still separate, which makes them much easier for me to manage.
3. Pay yourself a salary
When I was new to freelancing, I spent pretty much everything I earned in my business. I never set anything aside for taxes or business expenses.
I quickly learned that my freelancing income is not just mine to spend -- I had to start paying myself a salary.
This can be tricky to figure out in the beginning because your income will fluctuate from month to month.
My best recommendation is to set up a budget for your business. Track your revenue, expenses, and how much you need to save for things like taxes and retirement.
From there, you can start to figure out what a good monthly salary would be.
4. Save money for taxes
Nobody likes to talk about setting aside money for taxes, but it’s a necessary evil.
Depending on where you live, you’ll owe roughly 30% of your income in taxes.
And if you live in the U.S., you’re responsible for paying estimated quarterly taxes:
April 15
June 15
September 15
January 15
If you don’t pay your estimated quarterly taxes, you could get hit with a hefty fee come tax season. So take those quarterly payments seriously!
My best advice is to download the Catch app and use it to save money for taxes. I love this app for a few reasons.
First, I love that once I save money for taxes in the Catch app, I don’t see it anymore. I’m not tempted to spend that money the same way I might be if it were in a savings account I looked at everyday.
And Catch will actually send your federal quarterly tax payments to the IRS for you. Or if you prefer, you can mail the payment yourself.
To get started with Catch, you’ll link your business checking account to the app and choose the percentage of your income you want to set aside for taxes.
From there, you can either turn on Autopilot or you can manually approve each transfer yourself.
5. Choose a bookkeeping software
My final tip is to choose a bookkeeping software to help you track your expenses.
This is something I didn’t do for a long time. I used PayPal to invoice clients so I didn’t think I needed bookkeeping software.
Then in 2020, I finally signed up for a QuickBooks account, and I’m honestly kicking myself for not doing it sooner.
QuickBooks makes it so easy to track and manage my expenses, quickly generate a profit and loss statement, and track how much I owe for taxes.
You can also use the software to track your receipts, mileage, and send invoices.
Final thoughts on managing your money
As a freelance writer, you’re going to have a lot of ups and downs in your business.
Some months will be great financially, and there will be months where it seems like every client is late to pay.
Once you have the right systems in place, managing your money will get much easier.