The beginner's guide to financial planning as a freelancer

The beginner's guide to financial planning as a freelancer

Former editor of IPSE Magazine, Benedict Smith, shares his first steps into the world of financial planning as a freelancer

Going freelance brings with it a wave of new experiences. The freedom of working however, wherever and whenever you want. The thrill of securing your very first client. And the unforgettable, terrifying moment when you realise that, as a business owner, you are now entirely responsible for the business’ and, in turn, your personal finances.

For the millions of us whose forte doesn’t lie in financial planning, it’s uncharted territory, and an unfamiliar, unwelcome aspect of our new lives as freelancers. That in itself can take some getting used to. Although you can make the transition easier by getting a handle on your finances the moment you go freelance. Like most things, it all starts with a plan…

A simple plan at that, but a plan nonetheless. Amid all the excitement of chasing clients and enjoying my new-found work/life balance, I put together a simple financial plan. And if I managed it, you can too. No excuses.

Budget accordingly

Budgeting is the logical place to start. After all, you need an idea of the figure you must hit to make ends meet once you’ve accounted for bills and the rough amount to tuck away for tax, along with any other business or start-up costs. I used the amount I had earned in employment as a rough marker to aim at. It was realistic enough without being stupidly ambitious. And between us, I gave myself a little leeway – I was prepared mentally and, to a certain extent, financially if I didn’t hit the ground running.

Let tech do the maths 

In total, 88% of spreadsheets contain at least one error. So naturally I didn’t waste time doing sums myself. The financial side of freelancing is no strength of mine, so onto the internet it was, where I found a nifty tool on Product Hunt called Hourly. It’s rough around the edges, but it turned out to be a real time saver.

Punch in the number of hours and days you expect or want to work, your business expenses such as internet, accounting or coworking spend, day-to-day expenses such as bills and living costs and your desired income each month. Hourly will estimate your tax costs and overall expenses before suggesting an hourly rate to charge for your services. Just multiply this by the number of hours in your working day and you have your minimum day rate – minimum because you can increase your price depending on experience, industry, location and even demand. 

Get flexible

Some costs stay fixed, and some will vary. Your income might rise and fall, particularly at the start of your freelance career – which is why your financial plan needs a degree of flexibility. Whether you’re faced with a dry patch, or you spend time chasing late payments, prepare and plan for the worst. This way you should be covered, and anything you earn above is a bonus.

Cash flow matters

Even if your business overheads are low, cash flow is king. As a freelancer, you quickly get used to being paid at odd times of the month and, inevitably, late. To speed up payment, I now invoice immediately and with 14-day terms – which does the trick most of the time. That and a bunch of good clients, of course. For sending out invoices I use Albert, a free mobile invoicing app that creates personalised invoices instantly. I’ve started invoicing on the tube and on the go, which makes life just that little bit easier.

It’s well worth taking advantage of every app and gadget out there though. They exist to make our lives easier. Check out the likes of Monizo – “the bank account for freelancers”, along with the handful of other tools Gemma Church has reviewed in this issue.

Have one eye on tomorrow

A financial plan changes over time. And if all goes well, the plan you created to simply survive your first six months of freelancing could well be redundant in four. Because freelancing isn’t just about making ends meet. We don’t work this way to survive, we do it to prosper. Don’t we? So the moment your freelance career begins to take off, be prepared to make longer, more ambitious financial plans.


Benedict Smith / Founder / Levo London / @levo_london