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By William Ballard
Learning to manage your money well is the key to your freelance writing success.
Unfortunately, many freelancers look at managing their money in this light: They hear the words ‘manage your money’ or anything close and immediately the mental images of huge spreadsheets, the IRS, and balancing checkbooks by hand, without a computer, come to mind.
When I finally made up my mind that I needed to get a handle on my finances I discovered that it isn’t nearly as difficult as I thought it would be.
Nor, fortunately, does it all have to be handled at once. So if your like me and finances make your head swim, and you’d rather do the dishes or the laundry instead managing your checkbook, take a deep breath, maybe two...
If you’re starting, as I once was, from not only knowing nothing about it but scared half to death as well, take a deep breath. Like so many other things about the freelance writing business, freelance writers really can learn to be a good steward of their money – it’s a totally learnable skill.
Here are some tips to get you started:
1) Be Willing
The first step to being a good steward of your money is to be willing. Be willing to discover where you’re at financially. Sure, money can be a scary subject. But if you’re finances aren’t in order, your chances of failing in this business multiply.
Besides, worrying about money is a horrible distraction. Once you actually decide to learn how to handle your money and take action toward it, the pressure will start to come off, trust me.
Just acknowledge your resistance, but overcome that resistance with willpower and look at your finances anyway even if it’s a scary old monster and you really don't want to. If you are going to make it in this business you must be willing to do the hard stuff.
2) Keep Business and Personal Separate
Begin to recognize the difference between your personal finances and your business finances.
For one thing, you’ll find it simpler over time to be able to track your business expenses and income separately from your personal expenses and income.
It just makes common sense, even if you’re using your own name as your business name, to have separate accounts for your business.
Personally, I prefer using a credit unions over banks because I don’t like what banking has become. In reality my business account is just a second checking account. It works well for me that way and it’s easy. BTW, most credit unions have free checking.
It will help you at tax time because you’ll know what your business expenses and business income are as opposed to the personal side of your financial life.
It’s far easier this way to tell if you’re really making a profit with your freelance writing or not. Either way actually knowing where you stand financially will inform many of the business decisions you need to make.
3) Track Your Income and Revenue Like You Really Know What You're Doing
You need to know how much writing income you’re actually making. Many freelance writers have multiple sources of income. Make sure you know exactly how much is coming from your writing and from each source.
I automate my bookkeeping through a software app program called Wave, which let’s me track income and expenses easily – it also keeps a running spreadsheet that helps me be aware of my cash flow status.
This type of service is way more than a budget managing system, it is like having your own accounting department at your finger tips. Watching my numbers lets me know several things:
Tracking your income is a must no matter what way you get it done, but it’s only part of it. Tracking expenses is also part of a complete accounting system.
4) Track Expenses
I’ve found it helpful to track each and every one of my expenses, even my cash spending. Not only does it help at tax time, but detailed tracking lets me spot money leaks, and they can show up in the darnedest places.
By now, probably everyone’s heard how easy it it is to spend hundreds on fancy coffee. Writers often spend more on books and magazines, and that make sense and all, but some still don't even know that these kinds of expenses are tax deductible.
Tracking expenses can also show you where you're not spending enough money – usually in some category like entertainment or clothing. Again, I use the program Wave for this.
I then move the totals in each category over to a spending plan type system so I can add what I actually spent and compare it to what I’d planned to spend.
Once I got set up I find I spend maybe 10 minutes a day adding expenses, 15 minutes once a week balancing my accounts and maybe another 30 minutes once a month with my entire accounting system.
Admittedly, it took awhile for this to become a habit, but I’m glad I worked on it. Knowing where I am financially is not only good for my business, it keeps my stress level down.
5) Save Like an Expert
A good-sized savings account or several is a freelance writer’s secret weapon for success.
I would suggest taking out at least 10 percent of every bit of income you make into a savings account, and call it some type of prudent reserve account. This is the account you would use to smooth out your income – if you need some, take it out without guilt, but make sure you put it back ASAP.
You should also save about 12 percent for taxes – that’s the number most tax guy's will give you. But you’ll want to ask yours and not take my word for it.
Another 10 percent needs to go into a business savings. After doing all of this, you will typically be living on about 68 percent of your income, which is really more than enough once you really examine the numbers.
Aside from all of those things, I would encourage you to also have a bunch of smaller savings accounts for vet expenses, savings for a new car, and so forth.
The reason I call savings a secret weapon is because when you've got at least several months of living expenses saved, you can become a way better negotiator for high paying writing gigs. With your savings in order, you are stepping into a strength zone that most freelance writers never get a chance to be in.
Sure, I learned to negotiate well before I had solid savings – but take it from me, it’s way easier when your savings are in the green zone.
However you decide to manage your money, make it simple that way it becomes an easy habit to develop and implement.
Now Over to You...
What are some of the ways you manage your money? Do you have any tips that you may be able to share with our community? Share your thoughts in the comments below.
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About William Ballard
Freelance Writer, Copywriter, Blogger, Inbound Marketing Specialist, and Author, William Ballard, helps small businesses and entrepreneurs, like you, broadcast their message across the Internet (and offline) and be seen as experts in their field. He has recently been dubbed the Expert Marketer of Writing.
William, a writer and content creator since 2007, enjoys sharing with others his experience on how to become a successful writer, blogger, and author. View more about William Ballard →