Being a freelancer comes with a lot of freedom, but most often, it also means you’ll be faced with an inconsistent income. Unlike full-time employees, you’ll also have to fend for yourself when it comes to a pension and medical aid, and to paying taxes.
At The Workspace, we don’t offer financial advice – but here, we’ve compiled some general money management tips, designed to help freelancers and entrepreneurs stay on top of their finances.
Basic money management
Creating a monthly budget is doubly important if you work freelance. This will help you feel more in control of your finances.
When you know how much money you need to cover your bills each month and you track your spending, you’ll always know how many jobs or projects to complete each month in order to be comfortable.
It’s essential to save for the future. Having a backup to see you through quiet months is also good for peace of mind.
Research what types of savings would work best for you, and compare current offers from different banks. Then comes the hard part – finding the discipline to save hard every month.
One useful maxim is to pay yourself before paying anyone else. When funds come in, get into the habit of automatically moving a certain percentage or sum into a separate account you use for savings. It’s also possible to set up an automatic debit from your business account to a savings account.
Growing your money
There’s nothing scarier than reading advice from financial analysts on just how much money you’ll need to retire one day. One gist is that it’s not enough just to save – you also need to put your savings to work to grow your capital.
Doing this involves investing sensibly (and of course, not spending what you’ve saved).
Along with sheer luck, the only real key to making sound investments is doing your homework. This wasn’t easy in the past, but the internet has changed things. You can check which investment companies have performed best over recent years (for instance, try Morningstar South Africa), compare rates and offers, teach yourself the basics of investments and do all the necessary fact finding online.
You can even use the internet to make most investments. For example, platforms like Easy Equities let you invest directly in stock markets. You can use sites like etfSA to research and invest in exchange traded funds (ETFs), and you can use investment companies’ sites to compare and invest in their products.
Getting financial advice
As a freelancer, it’s wise to get professional financial advice to make sure you’ve covered all your bases. A financial adviser can help you with your budget and advise you on the best types of investments.
Saving for retirement
Not everyone opts for an RA because of the associated restrictions this type of savings vehicle imposes. For example, you might choose to invest independently in a balanced portfolio instead.
No matter how you go about saving for your retirement, the sooner you start the better. You can always start with smaller payments and increase them as you start making more money.
Finding affordable medical cover can be tricky for freelancers because they have to cover the costs without assistance from an employer.
Instead of getting comprehensive cover, many freelancers opt for basic hospital plans and cover routine expenses, like medication and check-ups, out of their own pockets. If you can possibly afford any form of medical aid, it’s better than not having it at all.
Make sure you understand how provisional tax works and when you need to submit your returns and make payments. As a freelancer, there is a lot more responsibility involved in making sure you’re squared away with the taxman.
You don’t want a surprise payment coming along and ruining your budget. Understanding how it works and being proactive when it comes to your tax will also make it a less stressful aspect of your finances.
Freelancing at The Workspace
At The Workspace, we offer well-appointed but affordable serviced offices and coworking space, with professional meeting rooms, high-speed internet, full reception services and access to a range of other business services.
With the addition of interesting talks and networking events at most of our branches, this is the perfect support system for freelancers.