Get your clients to pay
To budget means that you need to know (or at least be relatively sure) when your clients pay you.
You obviously can’t reach into their pocket and pull out the money they owe you, so there’s some trust there you need to have, but there are systems that you can use and put into place that will help you nudge and remind clients.
Don’t be afraid of doing this. No business can run without money so if you are doing work, make sure you get paid.
Track your expenses
You have to stay on top of your expenses. Taxes being your biggest. Remember it’s not your money, but here in the U.S. you will need to take a percentage of what you bring and put that away. Pretend it doesn’t even exist because it’s not yours anyway.
Aside from that, you have to be mindful of the phrase “it’s for the business and I’ll just get more revenue in to cover this.” It’s a deadly phrase and here’s why.
If you have a 20% profit margin on your services and you buy something for $100, that means you need to bring in $500 in revenue, not $100. Make sense?
You really want your expenses to fight for their worth in your business.
Keep your business and personal separate
This is something that’s extremely important and helpful at the same time. This will make your accountant happy. If you don’t have one, and you do you own tax filings, well this will make your life so much easier.
As a part of this, you’ll want to build up that business account too. Make sure that you have a buffer in there. You need to maintain a certain level of cash in the business.
How much cash should you have really depends on what your plans are. This is an inception moment, because you need to really understand your budget to figure out what this number is.
You need to pay yourself. There are so many different philosophies around this, but try and pay yourself as soon as you get revenue into the business.
This will be your lifeline of sustainability. If you need $5k in personal monthly expenses, food, shopping, and living your life, then don’t think that all you need is $5k in revenue.
Remember you have expenses to pay, the business to invest into, profits, and spending cash for the business. This is overly simplified but you get the idea here.
Save for your future
This sounds like what an old man would say, but it’s important. Especially when you are young. You don’t want to work forever. So you want to capitalize on the flexibility you have to build a nice nest egg for yourself.
Put a percentage away of your salary into some sort of long-term savings account, like and IRA.
Automate your plan
Whether you have an accountant or not, leverage automation to move the money around.
Most payment systems and banks these days allow you to set up rules to transfer money around.
Whatever your percentages are for your salary, retirement, expenses, and business accounts, consider using tools like Freshbooks, Quickbooks, or whatever your choice is, to setup these rules.
While you are in there, set up reminders to check in on your budget and numbers. Make sure you are on top of your budget so that you can adjust accordingly.
Start a Freelance Business
More episodes in this topic:
What are the costs involved in becoming a freelancer?
Is the income from freelancing reliable?
What payment structure should I do?
How do you build a good freelancing profile in the field of web development considering the competition?
What are skills you can learn fast and have high freelancer value?
How to start freelancing?
Should you do free work to build a portfolio?
What is freelance?
How can I start freelancing without experience?
What does it take to be a freelancer?
Why did you start freelancing?
What is the very first step to work as a freelancer?
How do you set the boundary of work you do and work you don't do?
What are your client red flags?
What should you be able to create as a web developer before starting in your freelance career?
When starting out freelance, should I just be a generalist to get my feet wet, or should I go for that niche?
As a developer, should I throw my projects on Github or build a site from scratch to grab attention?
What can I use for social proof when starting as a freelancer?
How can I start freelancing as a web developer?
Should I use my name or create a business name when starting?
Should I call myself a “freelancer” (definitive answer)?
Why should you not be a freelancer?
How do you collect online payments as a freelancer
How much money do I need to make?
Why is hourly billing bad?
Why is hourly billing good?
What are the biggest mistakes a freelancer can make?
How to adapt and change to the WordPress climate?
How to budget as a freelancer?
What is your marketing plan?
What is your sales process?
What do you do to position yourself as an expert to leads?
How do you balance your time for sales and marketing?
How do you get high-quality clients?
Should I offer my services as a web designer/developer or specialize first?
What do you do again?
What is the best freelancing website?
What do you do for a follow-up sequence for leads?
How to attract clients with big budgets?
How not to be annoying in sales?
How do you convince someone to sign a contract?
What to say when a client is late on a payment?
Best of Season 3 - Get out of the comfort zone
Best of Season 3 - Building Relationships
S06 E12 - Undercharging, Targeting the Wrong Audience, and What You Should Do About It with Alex McClafferty
S03 Bonus - Tom McFarlin on Blogging, Balancing Work and Family, and Building a Business that Lasts
S09 E11 - Differentiation, Reputation, and Pivoting From the Top-Down with Peep Laja
S01 E11 - Kai Davis helping freelancers get more clients with outreach