Finances for the Freelancer

As a freelancer your income fluctuates every month; sometimes it is more than your expectations and sometimes you earn low. You are not sure whether you will be able to earn the same income or more than this in next month. This is the main hindrance which prevents you to plan a successful budget and finances. But there are ways out. Let's discuss them.

The most important rule to plan finances is to know how much you spend. So, start with your expenses to make a successful financial plan. Take a notebook and write down every penny you spend. Do this for a week.

Divide your expenses into different categories like food, grocery, fuel, clothes and the likes. Categorization will make your job easier. You will not only discover how much you spend but also be able to find out where you spend in excess and where you can cut down so that you can save some money.

Next step is to allot your income to these expenses. I know it is hard because you are not certain whether you will be able to earn the amount next month. Make sure you cover all the essentials like your insurance installments, your grocery, telephone bills and the likes.

If some money is left after giving for these expenses, deposit it in your saving account. This will help you to save some dollars for those hard times. Make sure that you are left with some amount for your entertainment. This is necessary because otherwise your financial plan will get monotonous with times and you may at one time feel like quitting it.

If you owe some debts then it is better to pay them off first. If you owe more than two credit cards then it is wise to reduce the number. Excess cards tempt you to spend more and as you use them you add to your burden. So, it is wise to get rid of excess credit cards. If you owe any debt then use a part of your income to pay them off first and then start saving some money. Restrict your credit cards to emergency situations till you pay off your debts.

To manage your debts select the one which makes you pay more interest than others. Pay this first and then move on to the next one.

File for the income tax return. You are self employed and you can save your taxes. The self employed pay that part of their income as tax which is excess over their expenses. Higher your expenses lower is your tax liability. So, file for your income tax return and save that amount for those hard times.