Becoming a freelancer in your chosen field can be incredibly rewarding from both a personal and financial perspective. It does however, come with its own set of challenges, especially where managing your money and taxes are concerned. Whether you’re working in a creative or professional field, becoming financially literate can help to make your monthly invoicing, budgeting and taxes a little bit easier.
What is Financial Literacy?
Simply put, financial literacy is where you’re able to comfortably read about and have conversations about finances, understand these topics, interpret them and apply them to your own life to improve your overall financial situation. Understanding all of these elements of finance is vital when you’re a freelancer.
Being financially literate comes in handy for so much more than paying your rent or mortgage, car payments and budgeting for your weekly food shop. When you’re a freelancer, you’ll likely be managing your own invoicing, taxes and filing your self-assessment at the end of the financial year.
Budgeting and Taxing
Budgeting is crucial when you’re a freelancer. You’re not likely to have any huge overheads such as an office space or employees, but you may have your own website, car and other business essentials. Whether you calculate your expenses on an excel spreadsheet, app or in a notebook, it’s important to know what all of your regular outgoings are. That way you can ensure that these don’t exceed the money you’re bringing in.
It’s also incredibly important to make sure you understand the taxes you’ll be paying. At the end of the day you’re fully responsible for keeping a track of what you owe the government, and it’s down to you to make sure you put this money to one side ready to pay your tax bill at the end of the financial year.
Whether your goal is to build an empire and retire at 30 or you’re looking to retire later in life, getting these financial goals laid out will help you to achieve them. Financial literacy can help you to understand how you’re going to reach these goals and how long it will take you. Simply recognising that you need to save for retirement is a sign that you’re becoming more financially literate.
Ways to Finance Yourself
If you’re just starting to build up your business, you may need a little big of a boost. This could be in the way of a self-employed or freelancer finance agreement or a loan from family, either way there are a number of options available to you if you need a cash injection. This could be for a car to help you get to and from client meetings or even a new laptop to be able to write emails and send invoices.
Becoming a freelancer has so many benefits, but it’s important to make sure you’re financially literate before you take the leap.