Not having an emergency fund
Sometimes life throws you a financial curveball so it's important you set aside money to deal with it should it happen. Not only that, but with the freedom of freelancing comes the possibility that there may be periods where your workload slows down. Putting a small amount of money from your monthly paycheque (we recommend 5%) will help you pay for any unforeseen outgoings without disrupting your actual account balance. Allocating a separate account for this that isn't accessible by cash card can help curb impromptu spending.
Not staying on top of your taxes
Freelancing comes with the responsibility of paying your own taxes at the end of each year. Keeping track of your expected tax payout will make budgeting throughout the rest of the year easier and make the final paying of your taxes possible. Paying your 'Estimated Taxes' quarterly can be a great solution to this - smaller, more manageable amounts will feel less over-whelming than an having to pay an almighty bill at the end of the 12 months.
Not separating business and personal expenses
Letting your business expenses and personal finances overlap is one of the worst things you can do as a freelancer. Spending money from your business accounts on personal items is not only counterintuitive but makes calculating your taxes more difficult than necessary. Keeping the two accounts separate allows you to easily see what incomings and outgoings relate to your business and these get measurably easier (and faster) if you keep them uncluttered from personal transactions. Keeping track of what you spend is vital in ensuring you are able to claim the money you are entitled to. Make sure you track all your spending with receipts and invoices, or even download an app to keep your records for you.
Not saving for retirement
Your retirement years are meant to be spent relaxing and enjoying the finer things in life, so make sure you're setting aside money for that exact purpose - it'll not only help you in the long run but it you can also save money on taxes. Your income tax withholding reduces every time you put money away for your retirement. Furthermore, the earlier you start investing money into your retirement, the more compound interest you will make - so why delay? There are a few options for saving including Roth IRA, SEP IRA and Individual 401(k) but as long as you've put a plan into action, you'll thank yourself one day.
Skipping on health insurance
You might think opting out of health insurance, especially if young and seemingly healthy, is an easy way to cut an expense out of your monthly outgoings. However, should the unexpected happen and you require medical attention, the costs you incur would far outweigh the money you'd previously avoided spending. Medical bills are the No.1 cause of bankruptcy in the United States so it's imperative you have a form of insurance in place.