Money Tips for Service-Based Solopreneuers, Freelancers, & Side-Hustlers
This week is C.R.E.A.M week, so we’re talking all about making and saving money and living our most abundant lives. And if you’re self-employed, gotta side hustle or moonlight as an independent contractor (hint: you received a couple of those cute little w9 forms instead of a w2 last month) you are in luck, because today I am letting you in on some cool ways to make sure you’re handling your self-made dollars like a boss.
Don’t Cook the Books
Before you make your first business sale you should have your official accounting system set up and ready to go. Accounting systems like Quickbooks, Wave, or Honeybook are super easy to use and are the backbone to your business. Accounting systems have features like invoicing, payroll, they help you automatically account for taxes and they connect with your bank account, and your Paypal account making it easier to track not only sales but your business expenses as well.
And speaking of business expenses, the best way to stay on top of expenses is to settle them at the end of every week if you have time, or the end of every month. When you track and settle expenses on a weekly or monthly basis, it’s less likely that you’ll forget what the purchase was. Also don’t forget to save all of your business receipts so that you have a paper trail in case Uncle Sam ever asks. You can either save the actual hard copies or you can download a cool app like Expensify, to scan and save your receipts digitally. If you do prefer to save the hard copies, a trick I learned to keep them organized is to actually tape them to a plain white piece of paper in order by date as much as you can and then file them away in order by month. Keeping track of your business expenses makes it a lot easier to write things off the next time you do your taxes.
We Should See Other Bank Accounts
As a freelancer or solopreneur or a side-hustler it might feel like well since all of the sales are mine, and I don’t have any employees, then all of the money I make can just go directly into my regular personal checking account. But that’s not true, YOU are your employee, and so the process of checks and balances should really be implemented from the very beginning. It’s best that you open up a seperate business checking and savings account and anything business related should be funneled through that account. So all your sales money should be deposited into that account and all over your business expenses should be deducted from that account. Also this is the account that you should link back to your accounting system of choice. Keeping everything separate, even if it’s just you, it’s the best foundation you can start from, because you do plan to grow, right?
Know Your Worth, Then Add (Federal, State, and Sales) Tax
Now my product-based babes definitely don’t have this issue, but for all you service-based babes out there, I want you to really hear me when I say this: stop including tax in your base rate and charge it separately. Everyone on this earth is used to paying sales tax for the products and services that they purchase on a daily basis, so if you’ve been charging flat rates because you don’t want to miss out on a sale, you my dear are doing yourself a dis-service. As a business owner you’re responsible for more than just a 7 or 8 percent sales tax on each sale you make, you’ll also have to cough up 15-20% more to pay your federal and state tax during tax season. That’s a lot of tax. So while you can’t charge it all to your client, at the very least you should be charging them the standard sales tax for the county that you live in.
A Little Off the Top
Now that we’re charging tax, we need to put it somewhere so that we can pay it when the time comes. Whenever I receive a deposit into my bank account, I immediately calculate what 30% of that deposit is and then I move that amount to a bank account that I opened specifically to hold my tax money. Then when it’s time to pay my sales tax, which is usually quarterly, I pay it from that account and when it’s time to pay my federal and state tax in April, I pay it from that account as well. I keep my taxes separated because if I leave it sitting in my business checking account, I’ll think its money that’s up for grabs for something else, so i just take 30% right off the top so that i don’t even have that amount to work with.
the single life
Just because you’re self-employed doesn’t mean you can’t have a retirement plan. I used to think retirement plans were so 1999 but they’re still really important. Solo 401k’s or Individual 401k’s are designed just for people that work for themselves. I have a financial advisor and she set one up for me, so if you’re like me and stuff like this is just not in your wheel-house, there are people out there who can help you so its totally do-able.
One and Done
Ok so i recommend having ONE, just one, business credit card on hand to help you with larger purchase if you need it. And I do have a video up about how to keep your credit card balance low and the best way to make higher-priced purchases using a credit card, so be sure to check that out when you get a chance, I’ll put the link below. And if you do get a business credit card, be sure to get one with a really good rewards program, like cash back or something like that, so that you can earn things as you spend your hard-earned money.
That felt like a lot, money is so interesting. So that’s if for today vibes, I hope you enjoyed these money making and saving tips. Tomorrow’s blog will be a tutorial on how to properly ‘make it rain’, please have your dollars ready.
Kelley Raye | Brand Photographer + Creative Business Coach