As technology continues to expand, the ability to work from home in a freelance position is becoming increasingly popular. In 2015, there were an estimated 53 million Americans doing freelance work. That is a massive percentage of today’s workforce.

Yet, many freelancers are failing to take their self-employment seriously, missing out on what could be the most important part of the gig – money.

Managing finances while freelancing can be a tough job on its own, which is why I wanted to provide some crucial tips to help you save and manage your money effectively throughout your freelancing career.

Know Your Taxes

One of the main pitfalls in the freelancing world is managing taxes. This is because you do not have an employer to do it for you. Every year, there are a number of freelancers who get hit with an enormous bill from the Internal Revenue Service, requesting the freelancer pay back the taxes they had failed to report throughout the year. This can put a massive damper on the joy of freelancing.

With this in mind, it is vital to understand how to manage your taxes as a freelancer in order to survive the next tax season. As a freelancer, you should know exactly how much and what you need to pay back in taxes each year. Understand the income tax rates for your state and apply these to your earnings – just like a full-time employer would.

Quickbooks has a fantastic self-employed tax calculator that will help you estimate the self-employed portion of taxes you will need to pay back.

Have a Plan B

The truth is, clients come and go. It is vital to have a plan B. A backup plan can be a deciding factor in whether or not you succeed as a freelancer. Many freelancers tend to put all of their time and effort into one client, but what is going to happen if that client suddenly stops doing business with you?

Have a backup plan. It is a great idea to have projects across multiple clients. This way if one leaves unexpectedly, you still have a source of income from the other client(s) to help you survive until a new lead is onboarded.

Speaking to this, don’t spread yourself too thin. If you can only manage one client, go for it. Just be sure to have a plan to execute in the event of a cancellation.

Save for Retirement

Sadly, 10% of today’s workforce will never retire. While young freelancers often tend to neglect this idea, it is always important to start saving for retirement as early as possible. According to a recent study, retirement is requiring a lot of careful planning and more money than ever before. This means that it is very wise for a young freelancer to start saving for it now, rather than when they are in their 30’s and 40’s.

Overall, freelancing can be a fantastic opportunity in today’s technologically-driven workforce, but the finance side of it requires careful planning an execution in order to ensure your efforts do not go unrewarded.

Thank you for reading. I’d love to continue to conversation in the comments below or on Twitter!