How to Simplify Your Finances as a Freelancer
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We have a lot of clients who freelance or have side hustles that aren’t W2 jobs. While we all know that there are processes we should have in place to keep our lives simple come tax time, life is busy. We often don’t keep up with paperwork and tracking and expenses the way we should, and then have to slog through hundreds of transactions to figure out which transactions were business expenses and which were personal.
Freelance life can be a lot simpler if you put a few practices in place.
Deposit all of your freelance or side gig income into a separate account
It can be hard to figure out how much you’ve earned through your independent work when you just deposit into your personal bank account and it gets mixed in with other income. Freelancers or those who pick up side work often have a hard time quantifying how much they’ve made, and combing through months of statements is tedious. Opening up a separate account for all independent income can help you gauge how lucrative your business is and also help you to determine how much income you need to report.
Pay all of your business-related expenses from your business account
It’s almost impossible to figure out which expenses were personal and which were business-related after the fact. Which art supplies were for you and which were for your freelance work? Which cabs were a work expense and which were just a good way home at the end of the night? It can be hard to figure this out when you’re looking at two week old purchases, and it only gets harder over time. Using a separate account for all of these expenses can take the guesswork out of what is deductible, and also help you see your bottom line more clearly.
Open a business credit card for all business-related expenses
Business credit cards can have valuable rewards programs and help you earn points when you pay for business-related needs. Some cards offer cash back on office supplies, phone bills, advertising, streaming and internet services, or business-related travel. Putting all of your work-related expenses on the same card also makes recording expenses easier, since you’ll know anything on your statement is a business expense.
Find a CPA or qualified tax professional to help you with your taxes
We get a lot of questions about what can be deducted from your business income when you file your taxes. However, it is best to ask a tax professional these questions. They can vary by state, and they can also change year over year with changes to the tax code. A good CPA can also help you to file taxes and make estimated payments quarterly, which can help you avoid a surprise in April.
Being your own boss is great for a lot of reasons, but it also comes with a lot of responsibility. Developing a clear way of defining boundaries between your business and personal finances early on can save you some serious time and potentially a lot of cash. Following these 4 steps can put you ahead of the game and help you enjoy the fruits of your labor.
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