Biggest Mistakes Freelancers Make

Do you or somebody you know work as a freelancer? There are several ways to make money by freelancing, however it is important that in doing so, you keep track of all your finances. Freelancers work to make extra side money, which is good up front, but can be costly down the road if you aren’t careful. There are several financial mistakes that many freelancers tend to make, which is why it is important to understand how you can make sure to avoid these money mistakes when picking up freelancing gigs.

Failing to report to IRS

Ah the Internal Revenue Service, where your money needs to be reported for taxes. Many freelancers tend to forget that they need to report any extra money earned from freelancing. If you don’t pay and get behind, you will end up owing the IRS a large sum in back taxes, which is why it is really important to actually pay taxes on a quarterly basis. This makes it easier for freelancers to make sure they are paying what they owe throughout the year, rather in one large lump sum at tax season. Failing to pay what you owe in taxes for freelance work might also cause you to pay extra late fees. So is it really worth it to take on a freelance job if you are going to have to pay for it in the future because you didn’t pay your taxes on time? Probably not.

Having no health insurance

If freelancing is your number one source of income, then it is likely health insurance is not something on your mind. Especially for single individuals who feel healthy, they might think they don’t need health insurance, as it is one extra bill to pay each month. Unfortunately, you now need to provide proof of health insurance when filing your taxes. If you do not, you will be fined, and again, is this fine really worth it? You also never know what might happen. Accidents and illnesses happen even to the least suspecting groups of people, which is why it is important not to skip out on having a basic healthcare package while freelancing.

Not saving money now or for retirement

It is important to create a savings account for emergency use, however many freelancers tend to forget to do this. This is especially true when it comes to setting money aside for retirement. Just because you are not working for an employer who offers retirement benefits doesn’t mean you should not be contributing to your future. Obviously if you are working as a freelancer, money and projects just might not always be there. Do your best to set up a retirement plan, because even putting away a small amount will benefit you in the long run. This holds true for even a basic savings account. Emergencies arise and you aren’t going to want to rely on credit cards or personal loans to get the money you need.

If you work as a freelancer either part time or full time, make sure to keep your financial priorities in order and you shouldn’t run into many issues.

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