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The number 1 rule for managing your money as a freelance writer
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Quick question for you.  Do you treat your writing like a business?

Or is it more of a hobby.  Something you do when you feel like it or have time for?

Either way (hobby or business) there is something you absolutely MUST do if you want to maximise the returns you're getting on all your hard work of pitching, researching and writing.

And that is … being very deliberate about how you handle your money.

It's far too easy to let money flow through your (digital) fingers like water.

Easy come, easy go, is NOT how you want to manage your finances.

When I was first starting my business (nearly 10 years ago) I quickly realised that most of the things I had learned about managing finances in a corporate environment simply did not fit into the world of a freelancer, solopreneur, or small business owner.

And I had to go back to basics and learn some hard truths all over again.

Money, Money, Money

The first cold, hard truth is that cashflow is everything.

No cashflow?  No money coming in?  No business.  

If you’re not getting paid for your work, then when the bills roll in as they inevitably do, you’ll end up using your personal money to pay them … assuming that you actually HAVE spare cash floating around.

After awhile, you (or your partner - or both of you) will start resenting having less personal funds to spend.  Or you’ll run out of money, which isn’t a good place to be, either.

I’ll Just Pay For That With …

The second truth is that thou shalt not mix thy business money with thy personal money.


Because when it comes time to answer to the tax man, you need to be able to separate out what’s yours and what belongs to your business.

And it’s not just for the benefit of the tax man.  

Keeping personal and earned money separate means you’ll be much more aware of what is what and which is whose.  Keeping track and accounting for the dollars will be easier and feel more “clean”.

What does that look like in practice?

Your bank accounts should be completely separate.  You should have your personal accounts, of course.  And you should have one account for your paid writing revenue and at least one account for paying writing-related expenses.  

Also, you should be keeping all receipts and copies of invoices.  

You don’t need fancy software to do that when you’re just starting out.  A shoebox and a spreadsheet will do just fine for awhile.

But once you start consistently getting paid freelance writing work, it can save you a lot of time to use finance management software.

Personally I use Xero.  But there are other good platforms out there, like QuickBooks and MYOB and Bonzai and others.


Keeping The Tax Man Happy

The third hard truth is that if you’ve registered as a business, you MUST report back to the tax department EVEN IF you didn’t make any money during that reporting period.  

I know at least one person who didn’t realise that they had to report no matter what.  And they got a nasty shock when a letter arrived saying they had to pay a fine for not reporting on time.

The rules are different in each country, but the point is … check the rules and understand your responsibilities with respect to them.

And if you do have to regularly report back, make sure you schedule reminders in your calendar.  

You’ll need to set aside enough time to get all your data together … receipts, invoices, etc. and then work through the calculations.

Keeping Your Bank Account Healthy

And the 4th hard truth is … you need a way of managing your finances so that you always have enough money to (A) pay your bills and (B) pay yourself.

Because what’s the point of doing all that hard work, if the money evaporates on bills and there’s nothing left for you?!

Early on in my business journey I came across the book Profit First, by Mike Michalowicz (affiliate link).  Profit First lays out a money management system that has saved my own business several times.

The first time was when a (big) new client suddenly decided they wanted to manage a large project themselves … leaving me with no clients and no prospects on the horizon.  It’s a newbie mistake.  Never, ever stop marketing or pitching for work.  But I digress.

In this instance, because I’d implement Profit First, I knew what I had to do to reduce costs so I could scrape through until I found another client.

The second time was when I ended up with a larger tax bill than I was expecting.  Fortunately, the Profit First method includes setting aside money for taxes.  So I was delighted to squeak through with a handful of dollars to spare after I paid what I owed.

It was sad to see the money go, but I was so grateful I actually had it tucked away.  The stress involved with paying off a tax bill that size would have been intense.

So What Is The Profit First Method For Managing Your Freelance Writer Finances?

In a nutshell, it’s like the old envelope system that your grandmother probably used … or maybe even your parents.

In today’s digital world, it involves setting up separate accounts for things like expenses, taxes, your pay, profit, etc.  And then, every time you get paid for your work, consistently setting aside a certain percentage into each account.

And here’s the kicker.  

Mike Michalowicz says the secret to always being profitable as a business (or even as a hobby) is to pay yourself first.  BEFORE you pay your bills.

Of course, he has a lot more to say about how to make sure you CAN pay your bills, but it is a very different way of looking at cashflow and deciding what to do with your money.

So whether you’re still treating your paid writing as a hobby or an actual business, Mike Michalowicz’s Profit First method (affiliate link) will help you come out ahead money wise.

I highly recommend it as a way of managing the money you earn from your writing.  And maybe one day it will save your business, financially, the way it has saved mine several times.

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