Being a freelancer can be good for so many reasons, some of the major ones being:
- You work whenever you want
- You determine whom to work for
- You determine how much you make
- You can outsource part of your work and increase your earnings
While the above are some very attractive benefits, and reasons for almost any designer to want to be a freelancer, you should also realize that there are some harsh realities to being a freelance designer.
All the benefits that come with being a freelancer have a counter benefit, and you won’t be able to move far unless you can overcome these benefits. For example, there are a lot of great freelance designers that have a lot of clients, that make a lot of money, but hardly make anything tangible out of it; they just don’t know where the funds is going.
The worst case scenario is when the time comes for taxes. As someone who runs a CPA study website, I’ve always paid extra attention to accounting. If you’ve ever found it difficult to keep track of your finances as a freelance designer, or if you make a lot of money but don’t know where it is going this article will be giving you 5 accounting tips that can help you take control of your financial life.
Tip #1: Separate Your Personal Bank Account from Your Professional Bank Account
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I’ve made this mistake myself, and I can tell you how dangerous it is. As a freelancer there are probably a million things you want to do, and it can sometimes be very difficult to differentiate what is a priority from what is not. You have to realize that the amount you have in your account can influence your stability and decisions as a freelancer, so make sure you always have enough money to sustain yourself; one great way to make sure of this is to keep different accounts.
Create a budget every month, and work out a percentage of your income that will be personal; if 60% of your income will go to your personal account, then let it go instead of having to spend 90% of your income on personal purposes without knowing it. Having different bank accounts for different purposes isn’t effective unless you stick to your decision, so make sure you only use your personal account for personal purposes, and your professional account for professional purposes.
Tip #2: Utilize an Invoicing System to Keep Track of Your Income
As a professional, do you know the worst thing that can happen to you at the end of a particular year? It is not knowing how much you’ve earned! This problem might look simple at first, but when you take a look at it beyond the surface, you will notice how dangerous it can be. For example, at the end of the year you have to pay taxes. You have to check your finances to compare your spending with your earnings, and you have to take a look to see if you need to increase your hourly rate.
All these things can’t be easily guessed, and it is often easy to think you’re winning when you’re losing; the only solution to this kind of problem is to keep track of your finances. Some people do this manually, and some do it through a freelance platform, but you have to be prepared in the case that something happens to your computer. The best alternative in a case like this is to have an invoicing system. There are a lot of invoicing platforms you can use online, but my recommendation is Freshbooks.
Tip #3: Hire an Accountant
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Most people see this has the last resort, but it really doesn’t have to be. Depending on your budget and the kind of work you accept, the best solution might sometimes be to hire an accountant. My philosophy as a freelancer is to only focus on what I can do, and to let others handle the rest. Of course, your work is to design and help clients get better results, so why waste precious hours calculating how much you earn? Why not leave the work to a professional?
Tip #4: Try to Avoid Spending Money Based on Impulse
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To complement my point above on separating your personal account from your professional account, something else you can do that can be of great help is to avoid buying things based on impulse. You probably don’t need that new designing course, or that new photo editing software. At least, not yet! So, why spend money to buy it outside of your budget?
Make sure to create a monthly budget to help you spend money on things that can help you improve; this includes courses, software, consulting, and any other thing that can be of help. Don’t just buy on impulse; I can tell you that impulse buying can easily lead you into debt. No matter what you need and how desperate you need, as much as possible, try to avoid buying it if it is beyond your budget for a particular month.
Tip #5: Spend Very Little Time on Accounting
This is probably the last advice you want to hear, especially since this post is on accounting, but I think it is the best so far. Accounting is good, and knowing your finances is great, but letting it take over your life is deadly. You have a life, and you have a career. You need to make more money, improve your skills, and lead an overall better life. Don’t let accounting get in the way of this. If you find yourself spending hours every day keeping accounts, get rid of most of the work and hire a professional to help you with it.
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