Ben Henry-Moreland was a classical singer straight out of college. Though school had given him the skills he needed to sing professionally, he realized he didn’t know how to manage its business side. How could he make a career out of being a freelance, classically-trained musician and support himself financially? 

This is a familiar problem freelancers face when starting their businesses. That’s why Ben decided to switch gears and help others with the same problems he experienced by starting his own financial planning firm specifically for freelancers called Freelance Financial Planning. His company specializes in financial planning and investing, and starting next year, tax preparation. 

We talked with Ben about what freelancers need to know about the financial side of working for yourself.  

What’s the first thing people should think about before quitting their current jobs to start a freelancing career?

If they’re starting out as a freelancer from scratch and don’t have any clients in the pipeline, it’s really going to take a minimum of a year or two to build up enough of a client base where you’re just breaking even. Obviously, it will depend on each individual situation, but I would say start with at least a year’s worth of cash to pay your bills at least.

What’s the number one best practice freelancers can do to stay organized when it comes to their finances? 

Spend 10 minutes a week logging your expenses in whatever bookkeeping program you use and make sure you’re setting aside emergency money. Calculate what your business expenses are versus your personal expenses. That’s going to save you a whole lot of time at the end of the year. And when you’re trying to put your tax stuff together, it’s going to save you a lot of frustration, too, if you do a little bit at a time regularly. That also goes with your personal expenses as well; just spending a little bit of time getting a picture of what your financial needs are.

What advice do you have for beginning freelancers who eventually want to grow their business but are afraid of managing a healthy work/life balance? 

Having some awareness of what you need every month just to keep going, and then looking ahead at the preferred lifestyle you’d like to achieve gives you a place to start to set some goals for what you want to make in terms of income and how much you need to grow your business. It can be challenging to find that balance. After all, you feel like you’ve got to work and grow your business as much as you can because you’re just starting and you don’t know many clients. It’s hard to step back from that and say, “Okay, I’ve reached the place where I want to get to,” if you haven’t actually set a goal in advance. So just set a goal for what you want that freelance lifestyle to look like.

Freelancers have to rely on themselves to make sure they are taking out the appropriate amount of money for federal and state taxes. What tips can you provide for people who have to calculate those deductions on their own? 

Technically you are supposed to pay quarterly. Otherwise, you’ll usually owe some sort of a penalty to the IRS. That can save you a little bit of money just in terms of penalties. I often recommend trying to replicate that experience for someone coming from a salaried job where they’re used to getting a regular paycheck. You might set up three different bank accounts. I recommend a business bank account where all of your money from clients comes in, and then you pay all of your business expenses out of that account. And then, every check that comes in, you’re going to take a percentage of that and put it into a separate bank account, which will be your tax savings account. Next, you can set up your personal checking account with a recurring transfer and basically pay yourself a paycheck. So you’re paying yourself a paycheck, you’re withholding your taxes, and then you don’t have to worry at the end of the year about owing a big chunk of money for taxes that you might not have.

Join NFICA for $5 a year

The National Federation of Independent Contractors Association is specifically designed to meet the needs of self-employed business leaders like yourself by offering competitively priced insurance benefits and lifestyle and business product discounts. With NFICA’s support, you can confidently say, “I can do this!” Learn more.