Organising Freelance Finances

— 3 minute read

It's imperative that you organise your freelance finances properly so you can run your business effectively. Here I talk about how I organise mine and how this fits with Freelance Insights.

Treat yourself as a business

As independent workers we need to think of ourselves as real businesses. We may only be one person doing everything but we should be thinking in terms of Stuart Ltd not Stuart the Freelancer. There's a few reasons for this:

  • It changes your mindset from being an amateur doing stuff in the evenings (which you're not!) to a professional delivering quality work and having a real impact on businesses. It immediately gives what you're doing more value.
  • Clients will assign more value to your work.
  • It will give you a base to build a high-performing and sustainable business.

Treat yourself as an employee

Most of us pursue this approach to work to gain more freedom - why would I want to be an employee again? This is about separating yourself from your business, legally and financially. We all know independent work often follows peaks and troughs of income, but I don't want my personal financial position to be impacted by my business' performance. Use your business to smooth over these peaks and troughs.

  • Pay yourself a monthly salary, regardless of the businesses performance that month.
  • Pay yourself monthly benefits (pensions etc), regardless of the businesses performance that month.

By doing this we, as individuals, can budget and manage our money as we normally would. Knowing that it's not going to change dramatically month-by-month.

Build a warchest

In order to get to a place where we can smooth over peaks and troughs we need a warchest. This will be unique to everyone but should be some amount of money that means you can continue paying your salary/benefits/expenses without any client work for as long as you feel comfortable with.

In reality this isn't likely going to need to cover your entire expense amount cos you'll always have some work on-going but it will need to pad the difference if you're having a quiet month. On the flip-side, some months (hopefully most months) you will have more money incoming than your expenses which is great and means you can build up your warchest further.

Once in a while I would suggest you re-evaluate your position and you can either adjust your salary/benefits cos you're doing well and have a good warchest built up, or you can grab a lump sum and then continue as you were.

Aim of the game is sustainability

For me anyway, and your goals may vary, I'm trying to build a business that fits my family, my goals and my future, I'm not trying to earn a quick buck from good rates then go back to corporate life when things are slow for a couple of months. I'm going to assume your thoughts align at least roughly which means we need to focus on sustainability.

Have a big month and earn £5k more than usual? Don't grab that out and buy a new car. Make sure that you can cover your £2k salary next month when you only pull in £500!

Pay yourself first

Save as you go

Monthly Outgoings £2000 salary £200 pension £200 misc expenses (servers, software etc)

Monthly Income Month 1: