Get on Track this Year & On Top of Your Finances
Freelancing is both a blessing and a curse. As a freelancer you’re probably repeatedly told how lucky you are, how great it must be to be your own boss, and then there’s all that freedom. While freelancing does mean all those things it also means having to pay for your healthcare out of pocket, and often an uncertainty about where or when your next check will come from.
When it comes to personal finance, freelancers have to take extra care to stay on track. Still, more people are freelancing than ever before according to a recent survey from the Freelancers Union. They claim that 53 million Americans freelance, which is 34% of the population.
Whether you freelance full time or on the side, freelancing can be rewarding on a personal and financial level. Make the most of your freelancing efforts by staying on top of the following:
Report Your Income to the IRS
Paying your taxes is easy when you’re working for someone else. Taxes are automatically deducted from your pay, and you report your income at the end of the year when you file your taxes. When you freelance your expected to make estimated tax payments on a quarterly basis, which can get confusing especially if you have to pay both state and federal taxes.
Making estimated tax payments on time can be difficult when you freelance and paychecks don’t come in consistently. You might prioritize other expenses over these payments, but that may cause you to fall behind. Late payments can lead to back tax payments, penalties or an audit.
Making your payments on time is easier if you sign up for an online account. The IRS allows you to make federal tax payments on the EFTPS website.
Get Health Insurance
While health insurance may seem like an unnecessary expense when freelancing, especially if your young and healthy, out-of-pocket medical expenses can lead to significant debt. With the addition of Obamacare the federal government can now fine you $695 or 2.5% of your income for going without coverage.
Planning for Retirement
Many long-time freelancers have little if anything saved away for retirement. While corporations offer robust 401(k)s you might be finding it difficult to grow a retirement account. There are plenty of financial institutions and financial advisors who offer retirement advice and 401(k) management. It’s never too late to start saving for retirement.
Saving for Emergencies
While contract work is great it may not be consistent. Having an emergency fun or savings account is always a great idea, but it’s even more vital for freelancers. Short term loans and credit cards come with high interest rates and fees. By putting a small percentage of each paycheck away in a savings account can help you get through lean times.
It’s never too late to start managing your money better. Make the most out of your freelancing this year and master your personal finances.
How do you manage your freelance wages? Did you find this article helpful? Let us know in the comment section below.