“If most freelancers were financially secure you’d see a lot more successful freelancers.” – Brennan Dunn,
Being a freelancer is no easy job. One one hand you’re trying to effectively utilize this beautiful system which allows you to work with complete professional and creative freedom, while on the other hand, you’re trying to make sure you don’t get swallowed whole by the same system. It’s true, freelancing does give you the power to generate an income solely on your terms, however many freelancers fail to exploit this power as their own personal finances are quite bad. In fact, many times, their personal financial situation affects how they get work and how much they get paid for that work.
This is an understandable dilemma. Without someone like a certified financial planner helping you figure out your money matters, it can become quite a task to keep a solid hold on your financial future. In fact, most financial experts would recommend hiring a financial advisor (the jargon and paperwork may drive the average person insane), but as a freelancer, there are a few things you could do to help yourself as well.
- Understanding The Problem
But before we get to that, let’s get to the root of why so many freelancers end up in a financial soup. The thing is, that because many freelancers are not financially secure, they often end up taking low paying projects in haste, simply to keep the cash flow going. In return, they end up undervaluing their services, they spend more time and make less money, and eventually pick up another financially and creatively draining project which effectively resets this vicious cycle.
- Reducing Your Tax Burden
There are many ways freelancers in India can get tax deductions on their expenses.
- Office/Workspace Rent – If you have rented an office, a co-working space, or even if you work from home, any rent you pay is a tax-deductible expense.
- Digital Expenses – Commodities like website hosting, and domain name registration are tax-deductible expenses
- Recurring Expenses – Electricity bills, transport costs for work visits, phone bills registered under your name and any other day to day expenses and maintenance costs are also tax deductible if you do not many any cash payments exceeding INR 20000.
- Assets & Equipment – Laptops, printers, furniture, and any other assets that you use for your work can also be included in this list. You must claim depreciation on all these assets and deduct a part of the money you paid to procure the device/equipment.
- Raise Your Price & Stay Grounded
One of the most effective and practical ways to exit the vicious cycle we described earlier is to fearlessly bump up your rates. Unlike a salaried employee, you don’t have to wait for years before you get a 15% or 20% hike. You could give yourself a 100% hike and charge double of what you usually do. Just make sure you don’t undervalue yourself and that you don’t end up raising your costs so high that no one can afford you. Take up any new clients only on your revised rates and do not reduce your number just to land a deal that only provides you with temporary relief.
The next step is the hardest; stay humble. Just because you now earn double the amount you used to, it doesn’t mean that you need to spend double of what you used to. Take the help of a certified financial planner or a reputed wealth management firm and see how you can make use of your enhanced income. Make some safe investments and watch your money work as hard as you did to get it.
- Spend Smart, Invest More
Probably the most obvious thing to say at this point in time. The easiest and most straightforward way to achieving true financial independence is, you guessed it right, spending only when you need to.
Your priority should be to identify and cut out any unnecessary expenses and utilize the money you would’ve spent on them on your investments. Make dedicated financial buckets based on your goals; for example, your buckets could be ‘Building Wealth’, ‘Retirement’, or ‘New Equipment.’ Whenever you save money, put it into one of these buckets, and then utilize it to make the investments that are most suited for that particular bucket. You might want to hire a certified financial planner to help you with that as well.