Set Up a Payment Wallet
If you work as an independent contractor, you should set up a payment program that gives you the power to control and manage it in real time. This will mean your bank can no longer hold your checks or funds, which will allow you much more financial freedom.
The Self-Employment Tax
One thing you won’t want to forget about is the self-employment tax. This represents 15.3% on the first $137,700 of your net income. The self-employment tax causes stress for many freelancers, so it is best to keep meticulous record-keeping so your tax adviser can help you find ways to minimize the expense.
Set Up an Online Portfolio
Don’t expect people to just take your word when it comes to what you’re able to offer. Take the time to set up an online portfolio or website that highlights your work record and past accomplishments.
Grow Your Business
Even when things are going well and you might have more free time than you expect as a result, you should still dedicate time each and every week to growing your business. The very nature of freelance works means you never know when things might slow down, so it is best to be prepared so that you can avoid scrambling if that does happen.
Set Aside Living Expenses
To help make sure you can handle anything that comes your way, you should try to save up at least four months of living expenses. The good news is that once you get into the habit of setting money aside, it can help discipline you to continue doing so even as times get better.
Have a Rainy-Day Fund
Along with saving up for living-expenses, you should also have cash on hand to help handle any rainy day situations. The general rule of thumb is that you should save at least double what you think you need. This can put you in a great place financially if you experience a dry spell.
Set Up a 401(k) Plan
1099 income is often looked at in a negative light since you have to pay self-employment taxes. However, it also provides you the unique opportunity to set up a one-participant 401(k) plan. This means you’ll be able to have an additional option when it comes to saving up for retirement.
The number of freelancers continues to rise, especially with people opting to work from home as a result of the ongoing coronavirus pandemic. However, many are learning that being a freelancer comes with certain financial pitfalls, so it is best to be prepared for anything that might happen.
Here are a few tips on how freelancers can take charge of their finances: