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Money, Taxes and Contracts for Freelancers

Money, Taxes and Contracts for Freelancers

Michelle Taute

Whether you’re a designer, painter or illustrator, you probably started freelancing because you wanted to make things. Maybe it’s websites or plein air landscapes or billboards on the highway. But if you don’t want to find yourself scrambling for a full-time job, you need to realize that you have a title even more important than the one on your website: small business owner.

I’m headed into my tenth year as a freelance writer, and while I’d much rather be writing this article than keeping up with bookkeeping or reading a 10-page contract, those administrative tasks are what allow me to work for myself without sweating the mortgage. Here’s a crash course on three of the most important business issues for freelancers: money, taxes and contracts.

Show Me the Money

Most new freelancers focus all their energy on finding enough work. And while that’s a good place to start, you need to think about cash flow, too. You may have completed several thousand dollars of work this month, but it’s not going to show up in your bank account every week in even chunks. One of my clients pays in two weeks, but many more send the check 30 or even 60 days after a project is done.

So what’s a hard-working designer to do? First, build up a cash cushion before you go freelance. Six to 12 months of living expenses is a good rule of thumb. If that isn’t possible, consider easing your way into the freelance life. During my first year, I spent 20 hours a week at a temp job, and the other 20 (or 30) building up my new business. A little steady cash flow was worth the trade off.

It’s also crucial to become better at managing your money. You might find $5,000 in your mailbox one week and nothing for a month or more after. Make a budget and give yourself the appropriate amount to live on each month. Fight the urge to go on an Apple store shopping spree after you receive a big check, and you’re less likely to be fashioning dinner from the dusty canned goods at the back of your pantry a few weeks later.

Next: Don’t Make the IRS Angry →


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