Financial Guide for Gig Workers and Freelancers

Freelance work is becoming more popular than ever before, and that’s great! Freelance work allows independent contractors to control their schedules, finances, and more.

But if you want to try out the gig economy for yourself, you need to know how to control your finances. If you work for yourself, you can’t simply rely on a 401(k) plan to handle your retirement, for example.

Let’s look at a quick financial guide for all gig workers and freelancers in this modern economy:

  1. Start with your budget
  2. Tuck away money for an emergency fund
  3. Calculate taxes and pay them quarterly
  4. Remember to save for retirement
  5. Use accounting software to keep track of expenses

Start with your budget

When you first start your home-based business, be sure to draw up a basic budget. The budget should include:

  • Your necessary expenses like your electric bill and groceries
  • How much money you need to make to pay for those necessities
  • How much money you want to make as you grow your enterprise over time
  • Your current debts — these will be an initial drain on your finances

In this way, you know exactly what contracts you need to take, how much you need to charge, and whether you can spend money eating out this week. In the early days, your budget might be pretty tight. But over time, you might just make more money than you ever did as a traditional employee.

Once you start earning money, try to snowball your debt until you are debt-free by paying off your smallest debts first. You can learn how to do this with an easy-to-use debt snowball calculator.

Tuck away money for an emergency fund

As your freelancing enterprise grows, be sure to save a little bit of money with each payment for an emergency fund. Insurance may be hard to come by as a freelancer, so you might need to pay out-of-pocket for things like medical bills or car repairs.

If you start building an emergency fund early, you’ll always have enough cash stored away for the proverbial rainy day.

Remember to save for retirement

In addition to saving for an emergency, you should also tuck away money into an IRA, Roth IRA, or some other savings account. As a freelancer, retirement is entirely in your hands. This can be a good thing or a source of stress, but keep in mind that some IRAs can help you save up to $1 million very quickly if you maximize your contributions.

Calculate taxes and pay them quarterly

As a freelancer, your taxes aren’t deducted from your paychecks automatically. It’s up to you to calculate your taxes. We also recommend paying your taxes quarterly rather than in a big lump sum at the end of your tax year.

Why? You get charged a fee if you don’t pay your taxes quarterly. Plus, it can be stressful making a big payment in April every year.

Paying your taxes quarterly lets you stay on top of your tax requirements and will save you money each year.

Use accounting software to keep track of expenses

Lastly, consider investing in accounting software. Accounting software will help you watch exactly how much money you spend on your business, plus keep track of how much money you make with each client. In the best-case scenario, you can use this software to take a tax write-off at the end of the year!

As you can see, there are a lot of financial things to keep in mind as a freelancer. But once you master these aspects, you’ll be happier — and more successful — than ever before!