You should only write when you received your income. It is not important to list when the work was completed. Only when we finally implement these little details can we impact the big ones (like, um, profit).Write down all gross income amounts gained in each month in an orderly manner. But freelance finances can be straightforward with the right preparation. If you over pay, don’t worry you’ll get a refund at the end of the year.įreelancing isn’t as easy as accepting money from clients via Due (unfortunately). citizen, fill out this form (or you can get an accountant who will file it for you and then you’ll just send a check to the IRS each quarter). In fact, at least in the U.S., if you don’t pay estimated taxes when you’re self-employed you’ll be fined. One way to remain acutely aware of how much you’re actually making is to pay estimated taxes. If you think $15 an hour sounds okay as an independent contractor, remember that you’ll only have made around $11 an hour after taxes. Just because it’s from Office Max doesn’t mean you can deduct it (for example, it could have been a TV). Wherever you decide to track work-related expenses, make sure to denote their purposes. I now use an app called Expensify, which allows you to take pictures of receipts and add notes to them so you don’t have to keep old receipts lying around. Sometimes people deduct these things on their taxes even though they don’t have receipts, but this is lazy and also illegal. The government allows you to deduct-“write off”-expenses such as website domains, insurance, meals with clients, commuting, internet bills, laptops, home office supplies and rent. Not keeping track of your office-related expenses is pouring money down the drain. They’re more likely to pay through systems they know and have seen before. Getting to know one system saves administrative time that would otherwise be spent creating new invoices and figuring out how the technology works. (If you’re audited, it’s incredibly easy for auditors to figure out what income you didn’t report.) It helps you remember income you may not be 1099-ed for but nevertheless need to pay taxes on.It prevents money from getting lost in cyberspace because you can easily track and remember which clients have paid you.Having one payment system (such as Due) is important for several reasons:
(Remember that you can easily Google how to create automated formulas so you’re not doing any of the actual math yourself.) Once all those numbers are out of your head and onto paper-once you’re no longer guessing at your livelihood-managing your finances becomes far less stressful. In a second tab, make a list of estimated monthly expenses-groceries, rent, entertainment, travel, retirement fund, cell phone bill, haircuts etc. Detail what you’re making, when and from whom in one tab.
If you don’t have a basic spreadsheet for your income and expenses, make one right now. Ironically, the solution to my anxiety was the thing that used to give me the most anxiety… spreadsheets. I didn’t properly manage my finances in 2015 for one reason: Anxiety. If you’re planning on making any money on the side this year, here’s how to take charge of your finances even when you’re not a math/economics person and never will be: But if you didn’t or you’re just getting started at freelancing-no matter where in the world you are-this article is for you. But because I was exclusively an independent contractor, I owed thousands of dollars to the IRS for 2015.įortunately, I had enough savings to pay it. And here’s what I (very naively) didn’t realize: unless you’re employed with a W2, you pay for all your social security and income tax at the end of the tax year.Īs a Millennial with no dependents and modest income, I was expecting a refund. I had multiple sources of income-from my day job, freelancing clients, the stock market. They said, “Please report your income,” or something horrifying like that. I quickly looked at my income and expenses.