Managing Finances As A Freelancer: Tips And Tricks

Being a freelancer is great. You’re your own boss and you get to choose your own hours. But it also means that you’ve got to keep an eye on your finances, which can be tricky when you’re juggling all of the other aspects of running a business. 

Here are some tips for managing finances as a freelancer:

How to Manage Your Money & Taxes like a Pro!
Freelancers need to manage their finances effectively to build a sustainable career.
Creating a budget, invoicing clients promptly and monitoring cash flow are key financial management strategies for freelancers.
Setting up an individual retirement account (IRA) and investing in stocks or real estate are effective retirement planning strategies for freelancers.
Consulting a financial advisor and tracking income and expenses are important steps in managing your finances as a freelancer.
Freelancers can deduct a range of business expenses from their taxes, such as home office expenses and business-related travel.

Set Up a Separate Business Bank Account

Here’s a tip that is sure to come in handy: Set up a separate business bank account.

If you haven’t been managing two different bank accounts for your personal and business transactions, now is the time to start. 

Setting up a separate account will help you keep track of your finances better, because it makes it easier for you to see what funds are being used for what purpose (and also prevents any confusion if you have one larger account with multiple sub-accounts). 

In addition, having separate accounts will be more secure as well – preventing any potential identity theft or fraud issues from occurring.

Here are some steps on how to set up an LLC (Limited Liability Company) Bank Account:

Freelancing can be a rewarding career, but it also comes with unique challenges such as managing your time effectively. This guide on freelancing and time management provides practical tips to help you balance your work-life responsibilities.

Don’t Forget About Taxes

Taxes are a fact of life. You can’t avoid them as a freelancer, and it’s important to get your financial house in order before the tax season starts.

  • When is my tax deadline?

Your tax deadline is April 30th if you file for the calendar year. If you file by April 30th, you don’t have to pay any interest or penalties on any unpaid taxes owed from the previous year (though interest will accrue if you owe money). 

If your income was fairly low this past year, it might make sense for you to file for an extension so that you have more time before having to pay your taxes.

What do I need to do before filing my taxes?

Gather all of your receipts and statements together so that when it comes time to prepare them, they’ll be organized and easy-to-find.

Taxation Considerations for Freelancers

Tips to Remember
Keep organized records of all business income and expenses throughout the year to simplify tax returns.
Be mindful of key tax filing deadlines and consider using tax software, such as TurboTax or H&R Block, to help with the process.
Utilize tax deductions specific to freelancing, including home office expenses, software and equipment, advertising and marketing expenses, and more.
Consider hiring a tax professional or accountant who understands the unique challenges of self-employment and can offer guidance on navigating tax laws.
Keep abreast of changes in tax laws that may impact filing requirements and deduction eligibility.

Get Your Payment Terms & Invoices Straight

Getting your payment terms and invoices straight can be a challenge for freelancers. Many of the folks who hire us are not familiar with the business world, so it’s important to make sure they understand what you need from them. Do they need an invoice? What kind of invoice? How quickly should they pay?

These questions can seem overwhelming at first, but once you have them worked out, you’ll feel confident knowing that everyone is on the same page and ready to work together!

As a freelancer, standing out in a crowded market can be challenging. This guide on marketing for freelancers offers valuable insights to help you create a personal brand, define your target audience and develop effective marketing strategies.

Track Your Time

Time tracking apps help you keep track of how much time you spend on each project, but even if you use one, it’s a good idea to make a note in your calendar or write down the amount of time spent on specific tasks. 

That way, if someone asks how long something took or what kind of workload you were under while doing it, you’ll be able to answer quickly and accurately.

Don’t forget about marketing and admin! Even though they aren’t technically “working,” these activities are essential parts of being self-employed—so make sure they’re included in your budgeting calculations as well!

Time Tracking Tools for Freelancers

Time Tracking Tools
Toggl: A user-friendly app that offers simple time-tracking features and automatic invoicing.
Harvest: A comprehensive time tracking and invoicing software that offers integrations with popular project management and collaboration tools.
Time Doctor: A time tracking tool specifically designed for remote teams and freelancers, offering features like screenshots, activity monitoring, and payroll integrations.
Clockify: A free time tracking tool with unlimited users and project management capabilities. It offers integrations with popular platforms like Asana, Trello, and Google Drive.
RescueTime: A time tracking tool that helps freelancers identify time-wasting behaviors and optimize their productivity. It offers detailed reports and analytics on how time is spent throughout the workday.

Get a System in Place for Saving Up For Quarterlies

The amount you need to save up depends on your tax situation, but in general, you should aim to have the total amount due in an account ready and waiting at least a month before you’re required to pay it. 

This can be in your checking account or another savings account (some banks offer special savings accounts specifically for this purpose). 

It’s also smart to keep enough money in your regular checking account so that you won’t suddenly run out of funds when trying to balance out what comes out of your business as well as what goes into it (like payroll taxes). 

If possible, try not using credit cards during this time period because their interest charges will add up quickly if not paid off quickly enough after processing has finished—and we all know how dangerous credit card debt can be!

You should start saving up for quarterlies as soon as possible the longer you wait until year’s end, the harder it is financially speaking since there are fewer opportunities during those months where there may be extra cash available from clients or other sources such as side hustles. 

Keep an eye on how much money is coming in each month so that by mid-February (for example), when quarterly taxes are due again–you’ll know approximately how much needs to come out of pocket versus getting reimbursed by clients later on down time road.

Managing your finances as a freelancer is crucial to building a sustainable and successful career. Check out this article on managing finances as a freelancer to learn about the importance of budgeting and invoicing, and get tips on how to maintain financial stability.

Know What You Can Write Off

It’s important to know what you can write off, and how. You have some leeway here it’s not like the IRS is going to be knocking on your door if you don’t take advantage of all the opportunities they provide for reducing your tax burden. 

But it’s still a good idea to familiarize yourself with the basics of what is deductible and why.

Here are some things which are commonly deductible:

  • Home office expenses (if you use part of your home exclusively for work)
  • Travel expenses, including motor vehicle mileage, fuel and tolls
  • Meals and entertainment costs incurred while traveling (but only 50% is allowable)

The publication explains how to figure out whether something qualifies as an expense eligible for deduction under section 162 or section 212 of the Code; whether depreciation may apply; how long a period must elapse before any deduction can be taken; etc., 

in addition to providing plenty of examples so that even beginners will understand the material at hand better than before reading through it!

Tax Deductions for Freelancers

Examples of Tax-Deductible Expenses
Home office expenses, including rent, mortgage interest, utilities, and repairs.
Software and equipment purchased specifically for business use, such as a computer or printer.
Professional development and education expenses, including conferences, courses, and training sessions.
Advertising and marketing expenses, such as website development, business cards, and social media advertising.
Business-related travel expenses, including mileage, meals, and lodging.
Health insurance premiums and other healthcare-related expenses for self-employed individuals.

Have Savings and an Emergency Fund on Hand

It’s important to have savings and an emergency fund on hand. Whether you’re freelancing or not, it’s a good idea to have a few thousand dollars in your bank account just in case something goes wrong. You never know when you might need that money!

You should aim for having 3-6 months of living expenses saved up; this means if your normal monthly income was $3,000, aim for having $9,000-18,000 saved up. 

If you don’t have that much stashed away yet (or can only save half of what we recommend), we suggest starting with whatever amount is realistic for you before moving forward with any other financial goals.

Once you’ve put away enough money for emergencies and life’s emergencies (like an appliance breaking down), start saving for other things: vacations, retirement planning or even paying off debt—we’ll talk more about these later on!

Working from home can be challenging, especially when it comes to staying productive and organized. This article on organizing your home office for maximum productivity offers practical tips on how to create a workspace that is conducive to focus and productivity.

Consider Getting Insurance

If you are a freelancer, then you’re basically your own business. And as such, it’s important to have insurance to cover yourself and your equipment. You can get insurance through a broker or directly from an insurer.

There are many types of insurance that freelancers need:

Equipment insurance: This will cover any damage done to computers, phones and other gadgets by fire or theft. It also covers damage caused by natural disasters such as floods or earthquakes if they occur within the area where you live.

Business interruption insurance: If you lose income after being unable to work due to an injury sustained while on the job, this type of policy can be used as reimbursement for those lost wages. 

In some cases though this may only be available when combined with workers’ compensation coverage so make sure you check before purchasing any policies!

Know What to Do When Clients Don’t Pay You

If you haven’t been paid, the first thing to do is ask for it. And if they don’t pay? Send a reminder. Then, if they still can’t get their act together and pay up, send them a final invoice that’s the last time you’ll be sending an invoice for that particular job unless they contact you and make arrangements for payment.

If even this fails to convince them to make good on what they owe, then it’s time to move on. You’ve done all you can do at this point; there’s no reason to keep chasing invoices from deadbeats (unless the client is willing to pay up immediately).

Staying focused and motivated when working from home is crucial to maintaining productivity. This guide on staying focused and motivated while working from home provides actionable tips on how to avoid distractions, establish a routine and stay motivated in a remote work environment.

Figure Out Your Personal Budgeting Needs and Goals

The first step in managing your finances as a freelancer is figuring out your personal budgeting needs and goals. It’s important to know where you are financially before you can plan for the future. 

The first step towards this is understanding your monthly expenses, and how much money you have coming in.

Here are some questions to ask yourself:

  • What will be my monthly income?
  • How much do I pay for rent, utilities, insurance and other bills every month?
  • How many days per week do I work on average?

Consider Hiring an Accountant to Help With Your Tax Situation

If you’re a freelancer, it’s important to have an accountant to help with your tax situation. Your accountant can also help with bookkeeping, financial planning, and business planning.

Make Sure You’re Staying on Top of Finances In the First Place

The first step to managing your finances is to make sure that you’re staying on top of them in the first place. If you don’t do this, it can be difficult or impossible to get back on track.

The best way to stay on top of your finances is by setting up a budget and tracking your income and expenses. 

This will allow you to see where all of your money goes each month, so that if there are any changes in spending habits or unexpected expenses, they can be addressed quickly before they become too much for you to handle.

It’s also important not only for freelancers but also for anyone else who has multiple sources of income: having an understanding of how much money comes in from different sources (such as freelance work) will give one more control over what happens when things go wrong with any one source over another (for example if someone loses their job).

Keep Good Records, as Per IRS Standards

As a freelancer, your business is completely dependent on your ability to manage finances. Fortunately, the IRS offers some helpful guidelines to help you keep track of all this information.

The first thing you should do is create separate folders for each year; these folders will contain all of your records related to that year’s finances. You’ll also need to create multiple subfolders within those yearly folders:

  • Business expenses (for things like travel costs and supplies)
  • Income (for when clients pay you)
  • Deductions (for things like charitable donations or business-related taxes)
  • Payments (for when you send money through Paypal or Venmo)

For each bank account that has any sort of activity related with it, make sure there are separate files so that everything stays organized and easy to find later on down the road if there’s ever an audit from the IRS!

Freelancing Can Be Taxing In Terms Of Finances. Be Prepared For Any Situation

Keeping good records is one of the most important things you can do as a freelancer. What’s more, having a system in place for saving up for quarterly taxes can help you manage your finances better. 

If you don’t have an emergency fund and something happens to one of your clients, it could be disastrous.


As a freelancer, the responsibility for managing your finances falls on you. Fortunately, there are plenty of resources available to help you succeed in this area. 

You just need to take the time to educate yourself and get a system in place that works well with your needs. Even if it seems intimidating at first (and maybe even tedious), just do it!

Further Reading

Here are a few additional resources that may be helpful in managing your finances as a freelancer:

Managing Your Finances Efficiently as a Freelancer: This article provides practical tips for managing your income, expenses and taxes as a freelancer.

5 Tips to Manage Finances as a Freelancer: This blog post offers insights on creating a budget, setting your rates, and monitoring your cash flow to effectively manage your finances.

How to Manage Your Finances as a Freelancer: This article covers a range of financial management strategies for freelancers, including bookkeeping, creating multiple income streams, and planning for retirement.


Q: How can I effectively manage my cash flow as a freelancer?

A: One way to manage your cash flow is to invoice clients promptly and follow up on outstanding payments. Additionally, creating a budget and monitoring your income and expenses can help you maintain financial stability.

Q: What are some common tax deductions for freelancers?

A: Freelancers can deduct a range of expenses related to their business, including home office expenses, business-related travel, and professional development. It’s important to keep track of your expenses and consult a tax professional for guidance.

Q: How can I plan for retirement as a freelancer?

A: Freelancers can set up individual retirement accounts (IRAs) or use other retirement planning strategies, such as investing in stocks or real estate. It’s important to consult a financial advisor and consider your long-term financial goals.

Q: How do I calculate my freelance hourly rate?

A: To calculate your hourly rate, determine your desired annual income, and divide it by the number of billable hours you plan to work each year. You should also factor in your business expenses and taxes.

Q: What are some tips for managing freelance income and expenses?

A: Creating separate business and personal bank accounts can help you track your income and expenses more easily. Additionally, using accounting software and hiring a virtual assistant can streamline your financial management processes.