Ready to launch your freelance writing or editing career in 2021?
Taking a part-time freelance gig full time in the new year?
Before you take the jump, consider the impact that freelancing has on your finances, especially if you’re currently working a full-time job with benefits.
When it comes to finances, you primarily focus on your income: your per-hour, per-project, or per-word rate and your monthly or annual income.
However, a look at your freelance finances requires more than just income that comes in. You also have to consider business expenses, quarterly taxes, health insurance, and more.
So, before you dive into a full-time freelance career, consider these financial factors.
Business Expenses
If you’ve already been freelancing for a bit, you probably have a good sense of what it costs to operate your business. Ongoing expenses may include website development and maintenance, subscription services, software, and more. You might want to invest in a new computer or a second monitor. Perhaps you need to create a functional home office, which can require furniture, organizational tools, and more.
Taxes
As a freelancer, you’re on the hook for your own taxes. Calculate your federal, state, and even local (if you’re unlucky like me) tax requirements and set aside that money to pay your quarterly estimated taxes. I recommend having a separate account where you can set aside estimated taxes to make quarterly payments easy and stress free.
Health Insurance
If you’re stepping away from a full-time gig with benefits, consider health insurance, life insurance, and other benefits that you’re also losing. Get some quotes on insurance before you dive into freelancing to ensure that’s an expense you can take on.
Staying on Track
Managing your own freelance business requires excellent record-keeping and superior organization. Staying on top of your finances is a must as you enter the world of freelancing. Explore different ways to manage your finances because you’ll need detailed records come tax time. Both free and paid options exist, so consider what works best for your needs.