How to set up your own payday as a freelancer
When I became a professional writer, I loved the freedom, challenges, and rewards of a freelance career. Yet I missed the steady paycheque that accompanied my banking career... at first. But I found a way to set up a regular payday routine, which helped my freelance cash flow and household budget operate much more smoothly.
Why setting up your own payday helps with budgeting
As a freelancer, unless all of your clients are on contracts with set payment dates, your "paydays" are all over the calendar. However your bills aren't. Regularly scheduled bills show up at the same time every month, whether your client paid you last week or this week. If you know your typical bill payment schedule, you can have payments from clients going into one account and set up a regular payday to move money from that account to a separate personal account in order to help you plan your monthly budget, reducing the likelihood of missed payments.
Don't forget your taxes
If you aren't on a company payroll, you're responsible for collecting and submitting your own taxes. I find it easiest to estimate my tax bracket for the year, and to divert a percentage of each payday amount to the savings account I've earmarked for taxes. I do the same thing with any sales tax I've collected.
Setting up regular billing/invoicing
Setting up your own payday is easier with a billing routine. I invoice clients on the last business day of each month, sending invoices directly from my accounting software program. Invoicing on a weekly or bi-weekly basis may better suit your situation, but whatever cycle you use, it's a good idea to invoice regularly.
Why automatic emergency savings are especially important for freelancers
I'm a big fan of automatic savings — pre-set withdrawals from your bank account directed to retirement, education, or other savings. It's particularly important for freelancers to save automatically to a rainy day fund, because we often don't have steady income. Projects end and income streams may dry up unexpectedly. Set up your payday to save automatically to a rainy day fund so you'll have money to live on if your freelance cash flow becomes a trickle or suddenly disappears.
Setting up your own regular payday helps keep you on track with your budget and savings, and can help smooth out the income inconsistencies that often accompany the self-employed life.
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