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Managing Your Finances as a Freelancer


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When I first started freelancing, I didn’t see it as a business. I didn’t know about taxes and expenses. And I didn’t understand that I had to separate business from my personal finances. And I certainly didn’t think about all the different things that I would have to pay for.

I mean, I was the only freelancer that I knew. No one in my family nor among my friends were freelancers. How was I supposed to know, right? When you work for a company, you are paid a fixed monthly salary, and your taxes and CPF are pretty much straightforward and settled for you. Whatever you see in your bank account is entirely yours to play with.

Fortunately, or unfortunately, I wasn’t making much money at all when I first started, so essentially there was nothing for me to manage. But as my business grew over the years and as I started working with more clients from everywhere, I realised that something had to be done. Sometimes I don’t even remember if I have been paid.

Freelancing without a proper financial plan is risky and it could be a costly mistake.

The most important thing to do: Track your income.

Clients are not going to pay you like a full-time employee. Payment is not automated. Sometimes there’s a complex invoicing system involved. Sometimes terms that deny you of your payment if you don’t invoice within a month exist in the fine prints. And sometimes, clients just forget to pay you, even if you’ve reminded them to. And then sometimes, you forget about it as well.

For a start, you don’t need a complex system.

All you need to do is just basic bookkeeping and Google Sheet has pretty good templates to get you started. The best practice is to always record any projects immediately and track the invoice date as well as when the payment is received.

Some freelancers like to do it weekly, some monthly and some whenever they’re free. There’s no rule to it. But recording any income immediately definitely saves admin time.

Record any work expenses.

If you’re a full-time employee, the finance department handles this. You pass any receipt and claims that you have to them, and then you get your money back. But as a freelancer, you’re on your own unless you hire an accountant.

Recording work expenses is essential because it not only tells you what your net profit is, but it also affects the amount that you pay for your taxes.

Which brings us to the next point.

Figuring out taxes.

It’s easy to forget about taxes when you charge your clients. It’s an invisible sum that haunts you only once a year. But as long as you receive income from any business activities in Singapore and earn more than $20,000 in a financial year, you are required to file and pay income tax.

Good bookkeeping practices throughout the year will reduce the amount of time you take to file your taxes. And to avoid eating into your personal savings, always put aside at least 10% of each project income for your taxes.

Read up more about taxes as a freelancer / self-employed person (SEP):

Next up, Medisave.

By now, you might wish you were a full-time employee instead, where your taxes, CPF and Medisave are taken care of.

While CPF is optional for freelancers and SEP, Medisave is mandatory and it is dependent on your income for each financial year. The amount payable is based on your age and net trade income for the year. Plan ahead and put money aside like you do for your taxes.

If you don’ t have other investment plans, you can also contribute to your CPF since it generates 4% interest.

Which brings up the topic of investment.

If you leave your money in the bank account and hope it will grow and be able to support you when you retire, you’ll be in for a shock. Most experts advice some form of investment, whether you’re a risk-taker or not.

Read, and read more to increase your financial literacy and be smarter with your money. For short and easily digestible articles:

If you feel up for the challenge, you can also read books like Rich Dad Poor Dad by Robert T. Kiyosaki.

Insurance Policies

Most full-time employees are covered under some form of medical insurance as employee benefit. They’ll have medical leave and/or hospitalisation leave on top of annual paid leave, a luxury that freelancers and SEPs do not have.

As such, putting aside money for insurance policies is important for freelancers. There are many different types of insurance and not every policy suits your needs. Find a trusted financial consultant and work out the coverage you need. Some examples of insurance policies are:

  • Life Insurance
  • Health Insurance
  • Critical Illness Insurance
  • Disability Insurance
  • Personal Accident Insurance
  • Hospitalisation Insurance (or MediShield Life)

Separate your bank accounts.

This also means creating different bank accounts for different purposes, if you need that additional help in visualising your expenses. As I’ve mentioned, there are many things to take note of.

1. Strictly Work Only Account
To make it easier for you to track income and expenses. Also makes your life easier should there be a need for tax audit.

2. Tax / Medisave
As explained above.

3. Insurance

4. Living Expenses
Includes your monthly bills, subscriptions, transport, food and other miscellaneous spendings.

5. Emergency Fund
At least 6 months worth, so you will have enough cashflow to last through tough times like a pandemic.

6. Investment

7. CPF / Retirement / Housing

8. Travel / Big Purchases

If you’re good with numbers and don’t need that extra help to visualise your finances, having two to three bank accounts would suffice.

  1. Work
  2. Spending
  3. Savings

What works for me does not work for everyone.

I am not a financial planner nor am I qualified to give out any financial advice, but what I’ve been doing has worked out for me and I hope it will give you an idea how to get started.

If you’re a freelancer or SEP and have more to share about managing finances, feel free to leave comments!