Five steps to managing your budget as a freelancer

Any freelancer will know that being self-employed isn’t all about working from coffee shops, wearing whatever takes your fancy or waking up at lunchtime. Freelancing is hard : work is never guaranteed, and you’re only as good as your last job. Because the volume of work can be unpredictable, managing your budget can be tricky to say the least. Here are five tips to help overcome those challenges and keep that cash flow flowing. 1. Keep your business and personal accounts separate Never mix business with pleasure – right? The trouble with freelancing is that if you love what you do, then business is pleasure and it can be hard to separate the two. But while there’s no legal requirement for you to have a business bank account, there are big benefits to formally separating work money from ‘me’ money. In particular, if you’re a freelancer operating as a limited company, formally separating your assets with a business account in your firm’s name ensures you and your business are two distinct entities. It means you can’t be held personally responsible for any debts or losses incurred. It also means you can be paid a salary by your business and earn dividends from any profits. 2. Work out your income Freelancing is like a rollercoaster ride. There are highs and lows, and you never quite know what’s around the corner, so balancing your income and outgoings can be a real challenge. The only way to predict future income is to keep track of your monthly earnings as soon as your business gets up and running. After a couple of years you’ll be able to see any peaks and troughs, allowing you to squirrel away funds during busy times to tide you over any downtime and help you manage your month-to-month cash flow. 3. Keep a record of expenses, and spend wisely Rent, Wi-Fi, heating, phone calls, web hosting fees – expenses have a habit of piling up – so, just like with your income, keep a record of your outgoings too. If you’ve got a business bank account, use this to buy equipment and pay bills. Keep your receipts, too, if you want to deduct these essentials from your tax bill. Keeping records also puts your spending into perspective – after all, that cute cat notebook and matching fluffy pen topper might have been irresistible, but did you actually need them? On the other hand, some things are really worth splashing out on, like other people’s expertise. While paying someone else to do things can feel reckless, delegating specific tasks to an expert can be money well spent. Don’t feel guilty about hiring an accountant, web designer or copywriter. Not only will it free up your time (so you can actually earn some money) it’ll ensure your business looks professional and runs smoothly. And don’t forget: you can also claim these services back as legitimate business expenses. 4. Set aside money for tax HMRC might like us to believe that […]

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