10 Money Management Tips for Freelance Writers
(Art Credit: Pedro Gomes)
As a freelance writer, you're probably juggling a lot of balls - writing articles, pitching new clients, attending networking events, and more. In the middle of all of that, it's easy to let your finances fall by the wayside.
Plus, many freelance writers don't have the luxury of a regular paycheck, which can make it difficult to budget and save for the future. You never know when a client will suddenly decide to cancel a project or when you'll have a dry spell in terms of new work. Most of the time, you're probably just used to living paycheck-to-paycheck.
But for those very reasons, it's even more critical for you to take control of your finances. If you want to succeed in this business, you need to be proactive about money management.
If you're not sure where to start, read on for 10 essential money management tips to put into practice starting today.
1. Keep Track of Your Income and Expenses
This may seem like a no-brainer, but it's essential to keep tabs on your finances on a regular basis. Set aside time each week (or at least each month) to update your records and review your bank statements and credit card bills.
Track how much money you're bringing in from clients and any other sources of income. Then, list out your expenses - both business-related and personal. Include things like website hosting, rent, groceries, and any other bills you have to pay regularly. This will help you better know where your money is going each month.
You could even set up a simple spreadsheet to help you keep everything organized. Once you have a clear picture of your income and expenses, you can start working on a budget (more on that later).
2. Set a Budget and Stick To It
A budget is a crucial part of any financial plan, and it's especially important for freelance writers. Without a budget in place, it's easy to overspend or undersave - which can put you in a difficult financial situation down the road.
In contrast, having a budget can help you make ends meet, save money, and reach your financial goals.
The best way to do this is to be as specific as possible when setting your budget. Include all of your income and expenses from the previous tip, then break down how much you need to spend in each category.
But creating a budget is only half the battle - you also have to stick to it. This may require some lifestyle changes, but it'll be worth it. Also, make a point to review your budget regularly and make adjustments as necessary. And if you find yourself overspending in one area, don't be afraid to cut back in other areas to make up for it.
3. Build an Emergency Fund
When you're self-employed, it's always a good idea to have some money set aside in case of an emergency. This could be anything from a last-minute client project to a medical bill or car repair.
Ideally, you should aim to have at least 3-6 months' worth of living expenses saved up. This may seem like a lot, but it's worth striving for. If you can't swing that much, start with $1,000 and increase your savings goal as you go.
That way, if you ever find yourself in a pinch, you won't have to rely on credit cards or loans to get by.
4. Open a Separate Bank Account For Your Business
One of the best ways to manage your finances as a freelance writer is to keep your business and personal expenses separate. The last thing you want is to mix up your spending and end up with a jumbled mess.
The easiest way to do this is to open a separate bank account for your business. That way, you can deposit your client payments into one account and use another account for your personal spending. You could also get a business credit card to keep things even more organized.
Just make sure you're diligent about only using the business account (and credit card) for business expenses. Otherwise, you'll defeat the purpose of having a separate account in the first place.
5. Hire an Accountant
If managing your finances sounds like more trouble than it's worth, you can always hire an accountant to do it for you. This is a great option if you're not confident in your money management skills or simply don't have the time to keep track of everything.
An accountant can handle all aspects of your finances, from bookkeeping to tax preparation. They can also offer valuable advice on saving money and making smart financial decisions for your business.
Of course, hiring an accountant does come at a cost. But if it means peace of mind and improved financial health for your business, it could be worth the investment.
6. Get Everything in Writing
When you're working with clients, it's important to get everything in writing. This includes the scope of work, deadlines, payment terms, and anything relevant to the project.
Having a written agreement in place will help prevent misunderstandings and miscommunication down the road. It’ll also protect you if a client tries to back out of the agreement or doesn't pay you for your work.
So before you start any project, make sure you have a solid contract in place. And if you're ever unsure about something, don't hesitate to ask your client for clarification.
When you do the work upfront and get everything in writing, it'll save you a lot of headache (and money) in the long run.
7. Send Invoices at a Set Time Each Month
Sending invoices can be one of the most tedious aspects of being a freelance writer. But it's also an important part of running your business and getting paid for your work.
One way to make the invoicing process easier is to set up a system whereby you send invoices at the same time each month. For example, you could send all of your invoices on the first Monday of the month. Or you could send them out on the last day of the month.
Whatever system you choose, just make sure you're consistent with it. That way, your clients will know when to expect your invoice, and they can budget accordingly.
8. Follow Up on Past-Due Invoices
Even if you have a system in place for sending invoices, there will be times when clients don't pay on time. When this happens, it's important to follow up and make sure they received the invoice.
If they have indeed received the invoice but haven't paid yet, gently remind them of the payment terms and ask when you can expect to receive payment.
If they claim they never received the invoice, send them another copy (either by email or regular mail) and give them a specific date by which you need to receive payment.
Most clients are honest and will pay their invoices as soon as possible. But there are always a few bad apples out there who will try to take advantage of you. By being proactive and following up on past-due invoices, you can minimize the chances of this happening.
9. Don't Forget to Pay Your Taxes
When you're self-employed, it's your responsibility to pay your own taxes. This includes both federal and state income taxes, as well as self-employment taxes.
If you're not used to paying taxes, it can be easy to forget about this important task. But if you don't pay your taxes on time, you could be subject to late fees and interest charges. Even worse, you could end up being audited by the IRS.
To avoid any problems, make sure you set aside money each month to cover your tax bill. That way, you'll always have the money on hand when it's time to pay your taxes.
And if you're ever unsure about how to file your taxes as a freelance writer, again consider hiring an accountant to help you out, but don't risk doing them yourself and getting into trouble.
10. Leverage Software
There are plenty of different software programs that can help you manage your business. From invoicing to time tracking to project management, there's a tool out there to help with just about everything, so it can be helpful to leverage a few of them to stay organized and save time.
By using software to automate some of the more tedious aspects of your business, you can free up time to focus on other things, like writing and marketing your services.
You've Got This!
As a freelance writer, you'll need to wear a lot of hats. In addition to writing, you'll also need to handle your own finances, marketing, and administrative tasks.
With so many balls in the air, it can be easy to lose track of things. But if you're organized and have a system in place for tracking your income and expenses, it'll make your life a lot easier.
By following these money management tips, you can avoid financial problems and keep your freelance writing business on track.