When I started my freelance writing business, I had to start from scratch. I taught myself how to find clients and market my skills, and even creating a work schedule while working from home was tough.
The only things that saved my business from failure during its first year were my financial awareness and determination to develop good habits.
Developing these five habits will improve your chances of success if you’re self-employed or struggling to make a living through your current business. Having someone to manage your finances will help reduce the stresses of entrepreneurship so you can focus on what’s important and cultivate healthy financial habits.
Keep Your Accounts Separate.
For several months after I started freelance writing, every time I got a paycheck, no matter how small, I would deposit it in my regular bank account and give myself a high five.
After wasting hours going through my regular checking account to check for any missed business expenses when it came time to pay taxes, I decided it would be wiser to open a separate account specifically for my business.
To have a successful business, you need to keep your personal and business finances separate. This will help you see how much your company is growing as well as what profit (or loss) it is making. Additionally, it’ll simpler come tax season, and – should your business ever be audited – all the necessary documents will be together and organized.
Save Money by Keeping Track of Your Expenses.
Being aware of even your company’s small expenses is crucial when you’re self-employed. The cost of that training course might not be as low as you first thought when you tally up the price of the three ebooks, website hosting, chamber of commerce membership, and social media management.
Having a budget is critical for any business, no matter how big or small you think your expenses are. Not to mention, by tracking your spending, you can ensure that you’re making enough money to not only cover said costs but also make a profit. Furthermore, if you monitor your spending habits, you’ll be able to save money in the long run by knowing which expenses are worth their price and which ones you can live without.
Choose Your Images Wisely.
What may seem random at first glance is quite purposeful.
In the beginning stages of my freelance writing business, I would use Google image searches to find pictures for my blog posts. More often than not, I would choose the picture that was most aesthetically pleasing without thinking about its relevance to the article.
All that changed when I got a notice in the mail informing me that I was illegally using a copyrighted image on one of my website’s revenue-generating pages. Just taking down the image wasn’t enough; legally speaking (I had a lawyer friend confirm this for me), I owed the company who owned the copyright close to $900. But at that time, I was only bringing in about $100 each month from my website! It was then I realized the importance of implementing daily financial habits to manage unexpected expenses.
With so many pictures saturating internet marketing, it’s easy to feel like you have to use someone else’s work. If you get caught though, the penalties can be high. To avoid any potential problems, make sure you know where your images come from. Or even better – create and use your images!
Plan for Taxes.
If you are employed by someone, taxes get taken out automatically from your paycheck so you never see that money. When you’re self-employed though, it works differently – something to keep in mind to cultivate good spending habits!
Depending on your location, you may owe taxes to the federal government, as well as state and local governments. You may also owe self-employment taxes and a variety of other taxes. After deductions, your tax bill can be up to 40% of your total income!
It is crucial to set aside money for taxes throughout the year to prevent personal and business financial trouble down the road. By having a dedicated tax fund, you avoid penalties for dipping into your own pockets to cover what your business owes.
Save Money Regularly.
You need two cushions for financial health: one for taxes and one other savings cushion.
My income sharply decreased earlier this year when my primary source of funds stopped working with me. Every week, I used to take home a large paycheck, but now I only pay myself a few hundred dollars monthly. Since I have to use most of my writing income for business costs such as web hosting and taxes, it’s been quite a decrease in earnings.
A couple of months after I lost my job were hard, but they would have been way harder if I didn’t have any savings.
The income of self-employed individuals can be unstable, especially in the beginning. One month you could make a fortune while the next may not even cover your necessities. By practicing healthy spending habits and saving regularly, you will have several months’ worth of expenses saved, which can act as a buffer for your business during tough times. This way, no matter what happens, you will still be able to cover your required costs.
This post was originally published on GoGirlFinance.org.
Photo: Thinkstock
