5 Tips to Manage Your Finances as a Freelancer

If there’s anything that the year 2020 has taught us, it’s that things can take an unpredictable turn. As freelancers, we often live with this fear on a day to day basis: what if my work dries up, what if there’s a disaster that puts me out of work, and, more recently, what if there’s a global pandemic that means I can’t leave the house for months on end?

Talking about money is something that we don't talk about enough in the creative scene but, as freelancers, it's such a big part of our jobs. I wanted to put together a little guide that explores how I manage my money as a freelancer, in hopes that it might help you do the same.

Disclaimer: I’m not a financial expert. These are things that have helped me based on my personal experiences and I ask you to do your own research before acting on any of this advice. I’m also talking from my experience as a sole trader, and not as a limited company, so please be aware that some of this advice might take a different format if your circumstances aren’t the same.

I recently spoke to another freelancer who was struggling with feeling overwhelmed by the process of managing their money. I’m guessing that, if you’re reading this, that you’re a freelancer too, and so you’ll know that we’re often not paid in the same way as non-freelancers. Pay-checks can come in at any time of the month and are, sadly, not ever guaranteed. A lot of the time we spend chasing unpaid and overdue invoices and, all the while, our personal and business outgoings still have to go out.

Something that made me feel a lot more confident and less overwhelmed when managing my money was separating my finances into different accounts.

Using Different Accounts

There are plenty of ways you can separate your finances. Whether that is into Pots, like the popular banking app Monzo uses, or into different accounts altogether. Some ideas for different accounts might be a Business account, a Personal Spending account, a Bills account, a Savings account or maybe even a Tax account. Having different pots or accounts for your money can help you best visualise where your money is, where it’s going and what you can afford.

When I first started freelancing, the fact that my personal and business finances were so muddled within one account made it difficult to visualise how much I was making, and spending, each month, which would often lead to feeling overwhelmed or overspending. As a freelancer, I’m often paid frequently throughout the month, and because I was making money at the same time as I was spending it, it was difficult to get a clear understanding of my finances.

Pay Yourself a Wage

I pay myself a wage each month by setting up standing orders, or direct deposits, between my different accounts. I send one payment into a Bills account which covers my bills and rent for the month and then another payment into a Personal Spending account. Doing this also creates a clear idea of the minimum amount I need to make per month as well as helps me save because my spending isn’t relative to my income: I don’t spend more just because I’m making more.

Use Budgeting Tools

Using tools such as Monzo can be a great way to budget. Within the Monzo app, you can set a budget and dissect that budget into budgets for the different aspects of your spending: from travel to food shopping. Monzo also keeps you notified as to how on track you are with your spending and whether or not you’re set to go over budget for that month.

If you don’t want to use something like Monzo, doing it the old fashioned way and setting up a spreadsheet to record your outgoings can be a useful way of keeping within a budget. It just requires a little more time than using an app.

Pay Attention to Seasonal Trends

When you’re looking at your money, it’s also important to pay attention to any trends. For example, as a photographer, I know that I usually make more money in the summer than in the winter, due to the longer days, better weather, and wedding season. Making sure that I know that is important so that I can put the extra money I make in the summer months aside to see me through the winter, just in case I need it. If you look at your finances over the last tax year, you might be able to spot some similar trends in your own field of work.

Use Automatic Saving Tools

Saving money, as this year has probably taught the majority of us, is of upmost importance as a freelancer. Preparing for the unknown is important regardless of your job, but when you don’t have a guaranteed income, that makes it even more important. If you’re someone that struggles to save or just forgets to, then you could consider setting up an automatic saving tool. A lot of bank accounts have this “save the change” feature - I know that Lloyds and Monzo both do, and I’m sure that many others do, too.

Another app that I use that helps me to save money without even realising is called Chip, and it’s great for freelancers. Chip essentially works out how much you can afford to save, and then saves that for you, and you can change the settings so that it doesn’t save if your bank account is below a certain figure, or you’re in your overdraft, for example. And you can also change the level at which it saves. So, if you want to save more, you can let it save more, and if you want to save less, that’s fine too. It also gives you the option to add goals and see how achievable they are and when you might achieve them by.

You can get a free £5 to boost your savings if you use the code JKJZHH when setting up your Chip account (and, no, unfortunately, it's not an affiliate code and I don't make money from you using it haha!).

All-In-One Taxes & Invoicing System

Taxes. The bane of every freelancer’s life. Taxes can definitely be intimidating, but I use an app to manage mine called Quickbooks. You might have seen it advertised before, but Quickbooks is a great all-in-one system for managing your books and your invoices. You can send invoices and receipts through the platform and you can categorise your income and outgoings as personal or business related. It helps to generate your self assessment form for the end of the tax year and gives you detailed insights on your finances, including an estimate on how much tax you’ll have to pay as the year goes on.

These are just some of the tools and techniques that help me manage my money as a freelancer. If you want to watch the video in full, as well as join in the conversation in the comments about personal and freelance finances, you can do so here: