Avoid Getting in Debt As a Freelancer

Written by on January 30, 2020 in Economy with 0 Comments

Freelancing and being self-employed is more impressive than frightening. The choice comes with many benefits, such as not having to commute, being your own boss, and enjoying flexible working hours. When you start earning your living as a freelancer, you have to pay taxes and meet other financial obligations. Independent workers borrow money all the time so as to invest in equipment or drive business growth. It is quite easy to succumb to debt. Make sure to understand your revenue and plan for the future. If you have concerns with regards to money management, keep on reading to find out what the best ways are to avoid getting in debt.

Build an emergency fund

As the name suggests, an emergency fund is an account for setting aside money to cover unexpected financial situations. It is very important to have an emergency fund in place. You do not have the security of a paycheck. Some days will be advantageous from a financial standpoint, while others will not be. How are you possibly going to keep up with living expenses and continue doing what you set out to do? If you are short on cash, it will be a little bit difficult. You will be put in the situation of borrowing money. As a freelancer, you need an emergency fund. Ensure that a percentage of the income goes into the savings account. It does not matter how big or small that amount is. If you have things that you do not use anymore, sell them online. This will earn you some extra cash.

Organize your finances

Life would be a lot different if you had a good understanding of how much money you have or if you paid your invoices on time. Maybe you are not stuck in a cycle of debt. Perhaps you got IVA debt relief. And why not? The IVA represents a legally binding contract between you and the creditors. This contract makes it possible for you to avoid bankruptcy. The deal is as flexible as your own circumstances, which is why it is based on capital, revenue, third party payments, etc. The IVA does not affect you in a negative way. On the contrary, this financial solution offers nothing but benefits. Coming back to the topic, you need to take control of your finances.

You are a sole trader and you need to learn how to better organize your finances. The last thing that you want is to be in debt. It is a must to separate personal and business finances. This means having distinct accounts and clear-cut records. Since there may be inconsistencies in revenue, following a budget is of the essence. Calculate the monthly income, this will give you a good idea of what to budget. Moreover, count only on the recurring income. If you are able to take on more clients, the better. You have the possibility of raising the prices. It may be a good idea to outsource some of the work. Figure out if you can afford to make such a move, do it.

Take advantage of free resources

More often than not, individuals who are self-employed are on a tight budget. Their business does not suffer, but they cannot do all the things they have in mind. Clients pay in about 30 days and the timeframe is not always negotiable. If you talk with other peers, they will confirm this reality. You earn sufficient money to be able to purchase the things that you need. Since you are not doing excellent financially, it is recommendable to start taking advantage of free resources. Fortunately, there are countless resources that can make your life easier. When you get tired of creating proposals from scratch, deploy professional templates. They are only one click away. Better yet, use tools that are capable of streamlining your finances. Besides sending bespoke contracts and invoices, you will be able to send out reminders. You will no longer be dealing with unpaid invoices.

Eliminate unnecessary costs

If you think that you are struggling, reduce and even eliminate unnecessary costs. This can be difficult, but it is a necessity. If you do not have any idea what expenditures are worth giving up, track your spending for a month. When you have a clear picture of the situation, you can take measures. By cutting down on things like office space or travel costs, you will be happy and free. You can work from home, so there is no need to rent office space. If you cannot carry out your activities from the comfort of your home, rent a self-storage unit. You can set up your office there. As far as traveling is concerned, it is not paramount. That is what video conferencing is for. Eliminate anything that is not essential to your activity. The small things can make a huge difference, although it does not seem like it.

Be smart when it comes to debt

As a freelancer, you have special needs as far as financial management. The income that you receive needs to be carefully divided in many directions. You are responsible for paying the taxes. In the United Kingdom, for instance, you are only taxed for your profits. Basically, you need to inform the HMRC about your activities and, of course, pay income tax. Your fear of not getting into debt is holding you back. As long as you monitor your spending, there is no reason why you should not use credit cards. Take into account the features, as well as the benefits when in the market for a credit card. Your purchases are subject to an interest rate. Make sure that you get the very best rate.

The bottom line is that there are not great risks of getting into debt. You can avoid this trap and enjoy success as a sole trader. There are ways in which you can protect yourself. In the off-set that you have problems, resort to an IVA solution and you will not have to worry about anything.

Tags: , , ,


If you enjoyed this article, subscribe now to receive more just like it.

Subscribe via RSS Feed Connect on YouTube

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

FAIR USE NOTICE. Many of the articles on this site contain copyrighted material whose use has not been specifically authorized by the copyright owner. We are making this material available in an effort to advance the understanding of environmental issues, human rights, economic and political democracy, and issues of social justice. We believe this constitutes a 'fair use' of the copyrighted material as provided for in Section 107 of the US Copyright Law which contains a list of the various purposes for which the reproduction of a particular work may be considered fair, such as criticism, comment, news reporting, teaching, scholarship, and research. If you wish to use such copyrighted material for purposes of your own that go beyond 'fair use'...you must obtain permission from the copyright owner. And, if you are a copyright owner who wishes to have your content removed, let us know via the "Contact Us" link at the top of the site, and we will promptly remove it.

The information on this site is provided for educational and entertainment purposes only. It is not intended as a substitute for professional advice of any kind. Conscious Life News assumes no responsibility for the use or misuse of this material. Your use of this website indicates your agreement to these terms.

Paid advertising on Conscious Life News may not represent the views and opinions of this website and its contributors. No endorsement of products and services advertised is either expressed or implied.
Send this to a friend