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Money mistakes to avoid when freelancing

Money mistakes to avoid when freelancing

31 July 2018

Making the leap into freelancing can be liberating and exciting, especially if you’ve quit your day job, but it can be risky.

Here are some ways to help you have a better handle on your money, so you’re better prepared if your income slows.

1. Keep things separate

Putting your freelance income into your personal bank account isn’t always a good idea. It’s harder to track your financial success and locate business-related expenses. It might make things tricky at tax-time.

Consider opening a transaction and savings account that you only use for your freelance business. It’s a great first step in putting a record-keeping strategy in place. It can also make things easier when you decide to separate your business and personal finances in the future.

2. Pay super

Being self-employed means you don’t have to make contributions to a super fund – but it’s wise to think long term, especially when it comes to retirement. If you make personal super contributions during the financial year, you may be entitled to super co-contributions from the government. Check out the latest information on the Australian Taxation Office (ATO) website to see if you might be able to claim tax back. 

3. Plan for tax time

The end of the financial year (EOFY) means tackling your tax return. Review your tax time management options.

4. Get covered

Freelancing gives you independence, but means you’re no longer covered for things like sick leave. Planning for the unexpected is important but often overlooked. Think about your financial wellbeing.

5. Consider all your costs

Depending on your freelance work, you may need to set up a home office, buy work-related equipment, use your own vehicle, phone or home internet access. Work out all your costs then factor them in to what you charge. One of the biggest mistakes freelancers make is to undercharge for their time, leaving them unable to cover their costs.

6. Seek out experts

Paying an accountant or a tax expert could help you save (or claim back) money.

7. Have a contingency plan

Keep some money aside during the good times, so if your freelance income slows down, you don’t have to worry about how you might pay all your bills. 

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Readers should make their own enquiries about whether to use these platforms.