5 Ways Freelancers Can Improve Their Financial Health

The gig economy continues to gain much popularity despite eased COVID-19 pandemic restrictions. Nowadays, more people are adopting freelancing and prefer remote-focused employment. However, when you’re a freelancer, income irregularities are very common.

You can bring in more work than you can handle for some weeks. Then for other weeks, your pipeline can go down to a trickle. If you’re planning to be self-employed, here are some financial tips you should consider.

Separate Work and Personal Bank Accounts

Separating your personal from your business accounts comes with a lot of benefits. It helps you establish credibility. Clients will see it more professionally if they make payments to your business account instead of your personal account. It also protects your personal assets should your freelance business go down south.

Additionally, it makes tracking cash flow more manageable. It lets you gauge the seasonality of your different income streams, helping you to budget well. Not only liquidities, but it also helps you with your tax liabilities and tax returns. Since your finances are separated, you won’t have to slog through which transactions expenses are personal or from your business. So when tax season comes, bookkeeping will be so much easier.

Experts recommend having at least four separate bank accounts to manage your finances better. These include personal checking, personal savings, business checking, and tax accounts. You can always add more banking accounts depending on your needs and wants. For example, you can have a dedicated account for emergency funds or travel savings.

Establish A Budget

Setting a budget for your business helps you in many ways. You get a better idea of where your money goes, whether you’re overspending or underspending, what expenses need to be cut out, and how much income you need. Overall, it helps you plan what you can and cannot do with your business.

A straightforward way to manage your freelancing income is through a zero-budget technique. With this budget approach, you’ll have to develop a new budget from scratch every time you get your income, hence the name “zero.” Its main benefit is that it keeps your spending low. It’s flexible enough to manage the unexpected and irregular income of freelancers.

Upskill

As a freelancer, your skill sets are your milking cow. The more skills you have, the higher your freelancing power. Hence, keep upskilling. As the workplace and trends evolve, it helps you remain productive, competitive, and desirable. Further, in a very competitive job market, it gives you an edge over other fellow freelancers.

Remember that you’re the only person responsible for improving professional career growth and moving up the ladder. Hence, keep building up your profile and learn more new skills. To do so, you can take online courses, keep up with the latest industry trends, and take part in networking events.

Build Emergency Funds

In freelancing, you don’t get paid if you don’t have work. Even worse, clients take a while to pay their invoices. This puts freelancers in a riskier financial situation. To reduce this financial stress, it pays to set up an emergency fund.

For starters, set aside at least $1,000 for it. It doesn’t matter if you don’t have it in your account right now as long as you continue prioritizing its growth. Start contributing small,$10, $50, or $100 monthly, and keep it running. More importantly, ensure that your emergency fund can cover your three months’ expenses.

Get Insured

Being self-employed isn’t without risks, so looking and comparing different health plans from sites like Assurance is essential. Unfortunately, being a freelancer doesn’t give you the benefit of working under the umbrella of an employer’s insurance policies, which usually have better coverage.

Nonetheless, there are several options for you. These may include the following:

1. health insurance for low income;
2. Parent, spouse, or domestic partner’s group health plans;
3. Affordable Care Act (ACA) individual and family health insurance plans;
4. short-term term health insurance;
5. Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage.

However, they’re not always for everyone. For example:

1. You aren’t eligible for health insurance for low income if your household income exceeds 133% of the federal poverty level (FPL).
2. You aren’t eligible for group coverage through a family member if you’re 26 or older, single, and living alone.
3. You aren’t eligible for a tax subsidy for ACA plan coverage if your income is more than 400% of the FPL.
4. You aren’t suitable for short-term health insurance if you have longer medical needs.
5. You aren’t eligible for COBRA coverage if you weren’t a full-time employee under a company before.

Comparing health insurance options as a freelancer can be confusing, but it’s better than having nothing. Take your time finding the right coverage that meets your needs and financial capability.

Final Thoughts

While freelancing is freeing and highly rewarding, it comes with challenges that can be hard to navigate alone. However, with a sufficient understanding of the risks and setting proactive measures, you’ll reach financial wellness.