Ah, New Year’s and its resolutions. They always start big and we usually tell our cynical friends: “No, I’m really doing this!” Truth is, the cynical friends often turn out to be right, because real life always comes storming back in. According to U.S. News & World Report, 80 percent of New Year’s resolutions fail by February. Let’s be clear, we’re not trying to keep you from shooting for the stars. As freelancers you need that drive. But if you’re more on the down-to-Earth side when it comes to New Year’s resolutions, we have five very simple and effective financial resolutions you can start as soon as the champagne bottles are picked up by the recycling truck.
Spend within your means
This sounds like an obvious one, but for us freelancers this is trickier because of the self-employment tax that we’re responsible for and the fluctuations in our income. So make sure to build your life budget, taking into consideration the 20 to 30% you need to save for your tax obligations. (Lili’s Tax Bucket makes this process totally painless, so you might want to open one this year) Another good idea is to check in on your account at least once a week or turn on notifications to always know where you stand so you always keep your spending below your income. That’s the only way you can really control your profits (besides bringing in more money, but that you already know!).
Start a rainy day fund
A healthy rainy day fund should cover 3 to 6 months of all your life expenses. Of course, that’s a lot, especially for freelancers who don’t always have a clear vision of upcoming income. But that’s no reason not to start putting a little cash to the side every week. With Lili’s Emergency Bucket, you can start one with as little as $1 a day. Once you set it up, your weekly savings will automatically be moved into your bucket every Monday. If 2020 taught us one thing, it’s that it’s better to be prepared!
Look at the small ways you can save
Little daily savings eventually can go a long way. Start making coffee at home instead of buying it at the coffee shop. Turn down your heat or AC by a few degrees when you go to bed. Move your account to a banking service that charges no monthly fees. All these small things can add up to hundreds of dollars saved per year! Note: We’re not judging. If you love your morning coffee and you decide this is where you want to spend your money, that’s your choice and good for you – we’re just saying, there are always small ways around you to save a few bucks, find them!
Track your business expenses
A recent study found that almost 75% of freelancers overpay their taxes. This year, don’t be one of them! Keeping track of your business expenses will considerably help you reduce how much you pay in taxes. By sorting and categorizing your business expenses, you won’t miss a single deduction and get the tax refund you deserve.
Go talk to specialists
There is a lot of financial information out there, a lot of rates, a lot of terms and conditions in small type. A lot of it can be intimidating and out of reach. So this year, overcome your fears. Go talk to a financial advisor, to a retirement planner or a mortgage specialist. There are many options out there that can help you save big time and stabilize your financial health. You just might not know about them now, and one simple conversation can change that really quickly.
Now, best of luck. And happy new year!