There’s no doubt freelancing comes with many financial risks and responsibilities. Being self employed means you’re responsible for your business expenses, tax duties, and payment disputes. Before you become a full-time freelancer, it’s important to think ahead and put a financial plan in place. Here’s what you can do to protect yourself financially on the job:
Keep track of expenses
Becoming a freelancer doesn’t come cheap. There are lots of fixed and variable costs you have to account for when setting up your business. To ensure that you keep track of your money and spending, you’ll need to create a detailed budget ahead of time.
From website development and marketing to equipment and office space, there are many things you’ll need to get your business up and running. Start-up costs can be expensive and unpredictable, so you’ll need to have enough savings to cover the first few months. Remember, it may take a while before you start making enough money to cover your expenses. When creating your budget, you’ll also need to consider your tax obligations. It’s very important that you don’t make any mistakes when filing your tax return. A tax professional will be able to help you with this process to ensure you get everything right.
Work under a written contract
When you’re trying to make a living as a freelancer, there’s nothing worse than getting paid late. Unfortunately, it’s all too common for freelancers to have disputes with clients over late payments. In fact, many freelancers have dealt with dishonest clients who refuse to pay at all.
This is why it’s really important that you prepare a written contract for every project you do. A verbal agreement is simply not enough, even if the client seems trustworthy. Without a contract set in writing, a client could get away with not paying you on time, or at all. Since there will be no legal grounds to settle a dispute, you could end up losing money. Not to mention, you would have wasted valuable time on a project that saw no results.
So, when you put together your contract, make it very clear what your terms are regarding payment. Give your client a time frame for when they should pay you. If the client breaches these terms, and there is a dispute, you will be able to take legal action.
Get an Insurance Plan
Finding the right insurance plan can save your business from serious financial trouble in the future. There are different types of insurance policies you can get as a freelancer. One of the most important things you’ll need is health insurance. In the event of serious illness or injury, health insurance will protect you financially. Professional indemnity insurance is also a worthy investment for most freelancers. If a client claims that you were negligent on the job, indemnity insurance will offer you protection against litigation. Liability insurance is suitable for freelancers who have clients visiting their business premises. If a client were to be injured on your business premises, you would be covered with general liability insurance.
Other insurance solutions for freelancers include home insurance, vehicle insurance and media insurance. If you’re not sure which insurance policies are suitable for your business, it’s best to contact an insurance broker to ensure you get the best insurance deal for your money.
Planning and preparation go a long way in the freelancing world. Having a long-term financial plan will save your business money and improve your chances of success. Get started on a plan today.
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