Financial Tips for Freelance Writers

by Anne Wayman

freelance writing money tipsby Raine Parker

Freelance writers are, like many other contracting specialists, in a unique financial situation due to the nature of their job. Our income isn’t yearly and it can fluctuate dramatically. Because of this, we have to be especially vigilant when it comes to handling our finances. Unfortunately, many of us writer-types, including me, aren’t very good at that aspect of the business, so it’s extra hard for us to take care of our money. Here are a few tips that might be useful for freelance writers who need some ideas regarding their financial situations.

Understand Taxes

You don’t have to completely understand the tax codes, but definitely make sure that you understand how exactly you need to report your earnings each year. Because freelancing is different, in that you won’t, for example, have a W-2, you should consider contacting the IRS to get more information about how exactly you can file your return.

Keep Track of Your Records

If you don’t use an invoicing system, you should immediately get one started. Invoices are the best way to track the work you’ve done and the income you’ve made from each job. You can create itemized invoices that will also help you figure out and adjust your rates according to how you handled jobs previously.

Create an Emergency Fund

Because you can’t always count on a steady income from your freelance writing, it’s important that you have some funds reserved for the occasional dry spell or emergency that you encounter. This fund could really save you in a bind from getting in extreme debt or some other serious trouble. Take a small portion from your earnings and put it towards this fund.

Manage Your Spending

This is an important rule: do not spend against an account that has not been settled. You never know if a client is going to fail to pay you on time or at all. Don’t ever assume you will get paid for a job, and definitely don’t spend money you don’t already have. Practice restraint when you make your budget, and be frugal in your spending habits, especially if your recent jobs have earned you less than you had hoped.

Don’t Over Promise

In other words, know your limits as a writer. If you can’t make the deadline, then don’t accept the job. If the subject matter is out of your league, don’t try to fake it. This may sound obvious, but what you wouldn’t realize is that making these sorts of bids can take you away from other more valuable jobs, jobs that will be a more effective use of your time. Bid on the jobs you know you can do well, so that way you balance your time commitment to the income.

Raine Parker, who writes on the topics of online accounting degree. She welcomes your comments at her email Id: [email protected]

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{ 6 comments… read them below or add one }

Elizabeth West February 2, 2011 at 6:49 pm

I made an account to put in tax money from my web content income. I just started and I’m not sure what to put in, so right now I just take 20% and stick it in that account and DON’T TOUCH IT. With money I got from selling a consignment item, I started a separate savings account for my own stuff and I plan to add a little bit at a time to that one too, from both my freelance stuff and my regular full-time job.

I just had to take money out of the savings because my dryer croaked. *GROAN* But it was nice that it was actually there.
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Bill Swan January 28, 2011 at 2:36 pm

Found this out my first year when the IRS told me I was a business. Excellent post by the way!

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Jenn Mattern January 28, 2011 at 2:17 pm

Great post. I think the biggest financial issue a lot of freelancers have is when they say “freelancing doesn’t give me this or that.” That might be vacation time, sick days, or health insurance for example. The truth is that it does if you’re running your business properly. It’s so important to know everything your freelance income has to cover early on. When you know that, you make sure your rates cover those things and you aren’t left hanging down the road. Employers have to do this for employees, and as a freelancer you have to do it for yourself.

As for taxes I have to recommend some of NOLO’s books for the self-employed. They’re usually pretty good. Deduct It! is one of my favorites, but any book that helps you figure out small business taxes and what’s really deductible is more than worth its cost.
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annew January 31, 2011 at 12:02 pm

NOLO is always a good source, imo. And you can build your rates so sick pay, vacation pay etc. is included.

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Lori January 27, 2011 at 2:50 pm

LOVE this post! I’m a complete tax dolt, but I’m glad to see I’m doing some things right. I track my records and I never spend what isn’t there. I’ve got this number in my head that must remain in my bank account. If I dip below it (and it’s pretty high), I panic. To me, it’s zero even if it’s nowhere near it.
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annew January 31, 2011 at 11:44 am

I can’t imagine you as a dolt about anything Lori! Glad this was helpful.

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