How To Budget As A Freelancer? 5 No-Brainer Easy Steps

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How To Budget As A Freelancer? 5 Money Management Tips

Budgeting your money as a freelancer isn’t exactly the most straight-forward thing.

But it’s not that hard either, once you know the ropes.

If you’re just starting out as a freelancer, I do like to congratulate you because it’s not always an easy journey when you’re starting out and making yourself comfortable with getting income that’s not fixed.

When I first starting out, it took me months to just get the budgeting right for my small business and now I’m pretty confident to give some good advice to my readers.

Just like any money budgeting, it will take some practice and maybe some sacrifices in the beginning but with time, it will definitely get easier.

In case you’d like to know, the personal finance book that really made me realize this budgeting technique would be: Broke Millennial: Stop Scraping By and Get Your Financial Life Together (Broke Millennial Series)

She discusses other personal finance things too and if you haven’t given it a read, I do recommend giving it a go because it’s packed with valuable info!

Anyway, if you’re to start managing your money like a pro as a freelancer, then let’s read on! 😊

More From Me:

Best Freelancing Platform To Find Clients

How I Managed To Score A Client In Less Than A Week on Upwork
How I Started Freelancing With No Experience

1. Create A Business Bank Account

This was my first mistake when I started freelancing and I really wish I’d known this sooner.

If you haven’t registered a business, I do recommend doing so. It’s not as hard as incorporating a company, you can just register as a sole proprietor too if you like.

I personally registered my freelance business as a sole proprietorship and it has worked out well for me as I’m basically a one-man show. But if you have a partner or an agency, you might want to opt for a partnership or a corporation type of company.

Once you have registered your company, you want to apply for a business bank account.

If you’re a digital nomad or basically are running an “international” business where your deal with customers all over the world (like I do), you might want to give Transferwise Business Account a try.  You can also check out this article by NomadGate for the best international business bank accounts.

Please note different banks will ask you for different documentations, so just make sure you’ll be able to prepare those documents beforehand.

Some of the things that you want to look for when picking a business bank account would be fee-free including transactions, its ability to link to other business tools or accounting software. Really do your due diligence on this because banks can have hidden fees so make sure you read some reviews from their other business customers.

P/s if you want to open an international business bank account for example with Transferwise, do note that you’ll be paying more fees for the transactions. But they will be much cheaper than opening one with your local bank.

Benefits of Registering A Company As A Freelancer

There are a few benefits that are worth to be mentioned here:

a) Tax Purposes

When you have a company, the income that you get from the business doesn’t equate your personal income.

Meaning that if I have to pay for an online tool subscription that runs for $200/month, I wouldn’t be able to declare this as my business’s expense as this will go under my personal spend.

But, if I register a company, the $200/month subscription will be counted as an expense to my business, therefore my actual income from my freelance is actually lower. Therefore, I declare lower income.

b) More Professional

When I first started, I used to give invoices to my client with my personal details on them – which to be honest didn’t look professional at all.

So when you have a company, your invoices to your clients will show your business’s name and that itself can actually make you look more trustworthy.

c) Clear Division on Income

What I mean by this is that you won’t be mixing your own personal pay with your freelance business.

It might seem like a better way to do it, to have everything comes into 1 bank account of yours, but trust me, you’ll have better clarity of the status of your business with your personal financial status.

2. Create A Budget For Your Business

Just like you taking care of your personal finance, your business also needs some love and care when it comes to its finances. You’ll see what exactly is happening to your business.

One way that you could do it is also by budgeting. The technique that I learned from the book Broke Millennial: Stop Scraping By and Get Your Financial Life Together (Broke Millennial Series) is zero-based-budgeting for freelancers and that’s the exact same technique I’ve been using for my freelance business as well.

I personally don’t use this budgeting technique for my own personal finances but I do it for the business because it makes more sense since the business’s income isn’t fixed from one month to another.

So, this is exactly how I did it when I first started my business:

a) For the first month when I started freelancing, I did not use any money on the income that I’ve made because I simply want to make it a “cushion”. I use the fund that I’ve put aside when I was in my 9-5 to cover my freelance “journey” in the first couple of months.

b) I mapped out exactly what I’ve been spending for my freelance business. This could be my client-scheduling tool, my website, or any online tools that I actually pay for to run my business. I first did this just using a spreadsheet but if you have the means, I do recommend investing your money in good accounting software like FreshBooks or Quickbooks. You can read the article here to know more about Freshbook and Quickbooks.

I personally prefer FreshBooks as I’m not a fan of Intuit (parent co of Quickbooks) but you guys can make your own decision here.

c) For each month, I will have a budget on how I’m going to allocate the income that I’ll be making. I have a retainer-based freelance business, so it wasn’t very hard to gauge my monthly income. But if your business is more into project-basis, you can gauge your income by the number of projects that you have that month and how much you charge or simply taking an average.

Try allocating every cent of the income that you’re going to be making. If your business income is higher, than you can allocate the balance to the business’s savings and if your business income is lower, than you’ll see some categories that you might need to cut or use the “cushion” that you’ve set aside.

d) I will pay myself from the business bank account to my own personal account and budget my personal finance accordingly. If you want to see how I manage my money, you can read more here.

Here are some of the basic categories that I put on my business budgeting sheet:

a) Retainer income
b) One-off income


a) Employee – me
b) Online tools
c) Email hosting
d) Website hosting


a) Cushion fund
b) Tax

3. Cushion Your Business With Savings

Again, just like your own personal finance, I do encourage you to set some of the income that you’ll make with your business to your business’s savings account.

There are two main reasons why we want to do this:

a) Preparing for tax allocate 20% – 30% of savings here. If you’re savvy enough, you can also do a simulation on how much tax you gotta pay at the end of the year and work on that amount to save.

b) Preparing for the worst

Try to find a business bank account that also has a savings account and so you could channel this business’s savings there.

With freelancing, it’s very important to have some sort of cushion there since our income can be fluctuating. And this savings can really help us when we want to further grow the business, perhaps make it like a small agency with a few staff coming on board.

I do see my freelance business to grow to that so that if anything were to happen to me or I just want to take a month off, I still have my staff to continue the business operation.

4. Get Timely Payment From Clients

I honestly had to learn this the hard way, but there were a lot of mistakes I did when I first started freelancing. One of the biggest mistakes was not writing down the exact date I’m supposed to get paid by the clients in the contract nor the invoice.

At the time, I used to charge clients when a project finishes… so if a project takes too long to finish…then there’s no income for me that month.

So I changed the tactic to only offer retainer-based projects or contracts and it’s working well.

I give invoices to my clients every month with 15 days payment date and so far none of my clients have taken more than 15 days to pay me.

You might want to also put a note in your contract and invoice that late payment will incur late fee, for each day that payment hasn’t been made.

5. Pay Yourself As A Freelancer

How To Budget As A Freelancer? 5 Money Management Tips

It’s not rocket science on how to pay yourself as a freelancer.

In your business budgeting sheet, make sure you’ll have a section to pay yourself and make it a fixed amount, based on your personal money needs. But do remember the other costs that you will need to pay as well.

When I first starting out, it took me quite a bit of figuring out just how much I can pay myself. But as you get to budget your business, knowing exactly how much it costs to run your business, you’ll also know just how much you’ll be able to pay yourself.

You might start with a small amount – and that’s fine.

The luxury of being a freelancer is that it’s within your hands to change the income that you’re getting. You can always find more clients, build your rapport, and charge higher.

The more you work on your business, the more confident you’ll become and the more you’ll be able to pay yourself.

So my advice is to not worry as much if you couldn’t pay yourself the whole amount that your client is paying you now.

How To Budget As A Freelancer

It’s easy to think that we don’t need to properly plan and manage our freelancing income and just combine the money with our personal bank account but that isn’t exactly the best way to do.

For better management and clarity, it’s always best to separate your freelance business and your personal finances.

If you’re wondering how to save money as a freelancer, this is one way on how you can do so. Start by budgeting your freelance business, how ever much you’re paying yourself, then save from there. Just like how you’d normally save your money.

I hope this post is helpful to you who’s just starting out. If you find this helpful, please share this post around, I’d really appreciate it. 😊

And of course, if you have any questions, do drop them in the comment section below!

If you find the post helpful, please share it around!

2 thoughts on “How To Budget As A Freelancer? 5 No-Brainer Easy Steps”

  1. I found this article very informative especially as I’m a freelancer myself. I’ve only just started my journey and use a personal account at the moment. However, as an affiliate marketer I’m a sole trader and don’t work with clients. Do you think it would still be a good idea to open a business account? I don’t make enough to pay tax yet, so benefits of business expenses wouldn’t apply at this stage.

    • Hey Kathy, in my opinion, it depends on how much you are currently making.
      I usually will still recommend opening up a bank account because even though you are making a loss this year, you can minus the loss in the next year 🙂 therefore less tax you’ll need to pay.
      Hope this helps!


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