When you’re a creative freelancer, managing your money on top of deadlines, brainstorms, and studio sessions can be tough. You’d think because you don’t report to a 10-6 job five days a week that you would have all the time in the world to get your receipts and taxes in order, but that is rarely the case. The truth is: being financially savvy is one of the best things you can do for your career, and you don’t have to go at it alone. There are great apps and other resources to help you out. Here are seven tips to get your finances in order as a creative freelancer:
1. Get an invoicing software that you love.
I know love sounds like a strong word for something that tells clients how much to pay you, but once you find the right one, you’ll feel like so many of your problems have been solved. Programs like Quickbooks Self Employed not only send out nice looking invoices for you, but they also give you breakdowns of how much you made this year. My favorite feature of invoicing software is that when your client’s payment is overdue, they send an automated email to the client reminding them to pay you. It looks so official coming from the site and relieves you from the stress of having to send a “heeeeyyyy just checking in about my payment!” email.
2. Track your expenses using an app.
There are many budgeting apps out there, but they’re all getting at a simple goal: actually knowing how much you’re spending each month in various categories. You can use one of these apps for your business bank account so you can easily do your taxes. And you can also use one for your own money as well. Oftentimes we have financially unhealthy habits like eating out too much when we’ve just spent 15 hours on set, or impulse shopping because we’re stressed about our careers. Using an app that objectively breaks down your spending can make you aware of the ways you spend money and may prompt you to change your ways.
3. Get an IRA.
An IRA or an individual retirement account is a pre-tax account that will be vital to your retirement plans. If you’re freelancing, you don’t have an employer-provided retirement plan, and it can be hard to have the diligence to save on your own. It’s much easier to spend on gear, or food, or student loans. With an IRA, you contribute a max of $5,500 a year and it’s put in an investment account where you can decide the level of risk you’re comfortable with. If you want to be completely conservative with your money and have it grow slowly as you age, you can do that, or you can be more aggressive. Regardless, it’s a safe place for your money to grow and it’s a great option for self-employed creators.
4. Open a high yield savings account.
Usually you think of a savings account as a place where you sock away a hundred bucks and, at the end of the year, you’re lucky to have made two cents in interest. This is no longer the case! There are accounts that will return up to 2.5% of your money back to you in interest every month. You might be missing out on hundreds of dollars, so get on it.
5. Actually organize your receipts and put them in a folder.
I know, I know. That sounds very lame. But in the very, very rare case you get audited [less than 1% of people who make under $100k do], you will need to show proof that you bought a new GoPro for your last project.
6. If you DO get in trouble with the IRS, don’t spiral. Just call them.
One time the IRS mistakenly thought I owed them money because I messed up something on my taxes the first year I did them. [I wanted to be an #adult and I actually filed my taxes too EARLY and didn’t have a form they needed.] When this happened, I literally just called them and after 50 minutes on hold, I explained my situation to a very nice older man who canceled everything I owed immediately. If you actually owe the IRS money, you can tell them how much you can afford to pay monthly and they will put you on a payment schedule. Rip the band-aid off and confront the problem instead of being scared about it.
7. Consider a business credit card.
If you don’t want to make the jump into forming an LLC, but you do want to keep your business finances separate from personal, open a business credit card. A business credit card is great because it builds credit, tracks your expenses, and you may get some bonuses like points or miles. However, don’t open a card you can’t pay off in full every month, because then you’ll just go into debt and the interest rate will catch up with you.
Hope these tips were helpful! Comment on this post any financial questions, or if you have suggestions on what to cover next.
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Note From Tongal: “Personal Finance for Creative Freelancers" is part of a series of Tongal Community-written blog posts that were originally sourced in the Tongal Blog Open Call Project. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect the official policy or position of Tongal. Read more Tongal Community-written posts here and then Pitch us a topic you'd like to write about for the Tongal Blog!
