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Why Every Freelancer Must Have Financial Knowledge

bulb with dollar sign

As a freelancer, you are your own boss, which means you are solely responsible for managing your finances. Many freelancers are focused on their craft and might not prioritize their financial management. However, having basic financial knowledge is crucial to be a successful freelancer. In this blog, we will explore the reasons why you need to have basic financial knowledge and how it can help you thrive as a freelancer.

"Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this." - Dave Ramsey


Managing cash flow

Cash flow is the lifeblood of any business, including freelancing. Freelancers need to manage their cash flow efficiently to ensure that they have enough money to cover expenses and maintain a healthy financial status. According to a report by Freshbooks, an accounting software company for freelancers, 61% of freelancers have experienced cash flow problems at some point. Basic financial knowledge can help you avoid these problems by creating a budget, tracking your expenses, and managing your income.


Taxes

Taxes are a necessary evil that all freelancers have to deal with. However, understanding tax laws and regulations can be overwhelming, especially for those who are new to freelancing. According to the Freelancers Union, one in three freelancers doesn't understand how to file taxes correctly. Having basic financial knowledge can help you navigate tax laws and regulations, make informed decisions, and avoid costly mistakes.


Retirement planning

Retirement planning might not be a priority for some freelancers, but it should be. As a freelancer, you don't have access to traditional retirement plans like 401(k)s, and you have to create your own retirement plan. According to a report by Upwork, a freelance platform, only 20% of freelancers save regularly for retirement. Basic financial knowledge can help you create a retirement plan that suits your needs, set up a savings account, and invest your money wisely.


Negotiation skills

Negotiation skills are essential for freelancers to secure projects and set rates. According to a report by Freelancers Union, 45% of freelancers say that negotiating rates is a significant challenge. Having basic financial knowledge can help you negotiate better rates and understand the value of your work.


See Also:
Why Mastering a skill is Important

Professionalism

Having basic financial knowledge can help you maintain professionalism in your freelancing career. According to a report by PayPal and Intuit, 38% of freelancers don't separate their personal and business finances. Separating your finances and maintaining professional financial records can help you build credibility with clients and streamline your tax filing process.


Financial security

Freelancing can be unpredictable, and having basic financial knowledge can help you create a safety net for unexpected expenses. According to a report by Bankrate, a personal finance website, only 39% of Americans have enough savings to cover a $1,000 emergency expense. Basic financial knowledge can help you create an emergency fund and plan for unexpected expenses.



Conclusion

In conclusion, having basic financial knowledge is essential for freelancers. It can help you manage your cash flow, navigate tax laws, plan for retirement, negotiate better rates, maintain professionalism, and create financial security. As Benjamin Franklin once said,

"An investment in knowledge pays the best interest."

Investing in your financial knowledge can pay off in the long run and help you thrive as a freelancer.


See Also: 
Why freelancing industry was less affected by 2008 crisis

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