How to manage your money as a freelancer

The gig economy is growing quickly and many people are leaving their corporate jobs or starting a “side hustle” to venture into their own businesses. Freelancing and contract work are not only for passion projects, but, because of the current tough economic climate, are becoming a necessity to keep up with life’s expenses.

Now, for the majority of people who venture into entrepreneurship, freelancing or contract work, personal finance or accounting is not their forte. Having worked in corporate environments with all the benefits of having a human resources department to ensure you are saving towards your retirement and keeping up with other employee benefits, going it alone can be daunting.

While the benefits of being your own boss are many, such as control of your own time; making your millions, and possibly a lot more quickly than when you are employed; and the flexibility that comes with it; there is, however, another side to it – the lack of certainty about your next pay cheque, and the lack of employee benefits such as a pension fund and medical aid. Being your own boss can be tricky.

Below are a few tips on how to manage your money as a freelancer.


1. It’s easy to get caught up in the race of chasing your next invoice and trying to get new business. You need to have systems in place for administration (which, I have to say, I don’t particularly like), your personal finance and your business finance.

Get an accountant involved early on so you don’t miss any important steps that might slow you down later, like your business and personal taxes.


2. Keep separate accounts for your business and personal life. Too often, people register their businesses as a separate entity and have a business bank account, but still do day-to-day personal transactions using that account.

Keeping your accounts separate makes your business look and feel professional, and it makes bookkeeping easier.

To help you with your bookkeeping, there are a lot of software options to choose from for a small business, including QuickBooks, Xero, Wave and Sage.


3. This is something I learnt from my accountant – have a separate account into which you put a portion of what your business makes to pay income tax. A common mistake that freelancers make, especially if they are registered as a company, is to treat their personal and business finances as one.

To know exactly what type of tax you are liable for as a business, speak to your accountant or tax consultant.


4. There are many entrepreneurs who use their business account as their own personal purse. I know that the lines between personal and business can be blurred when you’re running a start-up, but try to build the discipline not to use the business card for personal use.

Imagine an opportunity arises for you to either partner with someone or be bought out by another company and, voilà, there on your bank statement – a purchase of a glass of red wine at Tashas on a Friday afternoon! It just doesn’t look good to any investor.

Rather, pay yourself a salary that goes into your own personal account. Let your business card be for just that: business. Know what it costs for you to live, so do your personal budget and stick to it.

But don’t stop there. Knowing your business budget is also very important, but it is rarely spoken about. Your business runs on a couple of expenses that must be covered every month, including data, rent, salaries and subscriptions. All these must be taken into account for bookkeeping purposes.


5It is so tempting to put off your investments when you embark on your entrepreneurial journey. It’s easier to say: “I will continue with my investments once I start making the big bucks.”

Instead of putting off investing or saving altogether, reduce your contributions to the minimum you can manage until you can get back to the level you feel comfortable with. Remember the two ingredients to successful investing: starting early and compound interest.

I personally like to think of this as the concept of paying yourself first. It does not matter how much I make every month as a freelancer, I save/invest 10% of my money. This ensures that I invest for my future regardless of my income.


6. I know medical aid and life insurance can be a grudge purchase for most. I have family members who frequently argue with me on the benefits of either one – or both. But the whole point is that you never know when one of those benefits will come in handy. We pay for medical aid and other risk benefits because we never know when an unpleasant situation is going to arise, and it’s especially difficult when we have not built enough cash flow to deal with those bad situations.

Take me for example: I had rarely been ill, but I was always on a medical aid. Then, in 2017, I had an issue with my chest and I was hospitalised. Just a few weeks before that, I had been contemplating a much lower medical aid plan and my husband convinced me not to downgrade. I’m glad I listened to him because all the procedures I needed required a lot of money, and the medical aid paid for them.

As a freelancer, there are many opportunities, but the responsibility lies with you to take care of your personal and business finances. It can be challenging but rewarding. You just need to do it right.

Makhu is a personal finance coach

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