Budgeting is a common financial management strategy for many people – regardless of where they work. However, if you are one of the digital nomads that are thinking of joining the expanding gig economy, then it could be even more critical for you to get your budget on track. Freelance and remote working are options that are growing increasingly more realistic and compelling in the modern marketplace. Of course, while working outside of the standard nine-to-five schedule has its perks, there are also unique challenges that you will need to consider too, like making sure you have a consistent income every month. Here is what you need to know about budgeting in the gig economy.
Always Be Prepared for Taxes
Managing your tax expenses as a freelancer is a lot different to dealing with taxes as a regular employee. You will need to think carefully about how much money you need to put away from your revenue each month to pay for tax, according to federal and state guidelines. The IRS requires anyone who earns more than $1,000 a year from their side-gigs to pay estimated taxes. This means that you pay an estimate of what you will owe every quarter. If you are concerned that taxes might be too complicated for you to handle on your own, the best thing you can do is seek the help of a professional accountant. Do not get into trouble with the IRS before your gig lifestyle takes off.
Separate your Personal and Business Expenses
Another thing you will need to do as a freelancer is make sure that your business and personal expenses do not overlap. If you are a graphic artist, then you might need to spend money on software and tools to help you create pieces for your clients. Those expenses can be deducted from your taxes, but only if they are associated with your business. If you can, open a business bank account where you can keep your freelancer expenses separate from the rest of your life. At the same time, remember to keep records of any invoices you send, along with receipts for items that you pay for, so your accountant can check how much you’re eligible to claim in deductions each year.
Get Ahead of the Game
Finally, remember that just because you earn a fortune this month in the gig economy, doesn’t mean that you’ll earn the same amount next month. Most freelancers live on a fluctuating income. That means that you never know whether you’ll earn enough money to pay the bills in one month. To make sure that you’re never in a desperate situation, try to save back enough cash to give yourself a few months’ worth of money for all the expenses you need to pay. Whenever you earn a huge amount from a great client, don’t just go out and spend all of your earnings. Squirrel a significant portion of whatever you earn each month away for a rainy day – you’ll thank yourself for being prepared later.