Your Totally-Not-Intimidating Guide to Finances as a Freelancer

Maybe you love your colleagues, maybe you enjoy the structure of an office, maybe you love knowing exactly when you’ll get paid. And yet, the pull to go freelance is strong. Maybe you want to be your own boss, maybe you want to set your own hours and maybe you want to make more money. This week on Girlboss, we’re taking the leap with helpful tips on freelancer taxes, inspiration and stories of real women who did the thing. Freelance, baby!

When we fantasize about working for ourselves, spending hours doing taxes, filing expenses and sending out invoices is definitely *not* a part of the rose-tinted vision. Let’s face it: There’s nothing sexy about budgets, taxes and invoices, but they don’t have to be something that gives you hives every time you think about it. Should I have money saved up before I go freelance full-time? If so, how much? Should I get an accountant? Should I register my business, even if I’m the only employee?

We asked 3 money-savvy women—Dani Pascarella, founder and CEO of financial wellness app OneEleven, Tori Dunlap, founder of Her First $100K, a money and career platform for Gen Z and millennial women and Tonya Rapley, millennial money expert and founder of My Fab Finance—to bless us with their financial knowledge and answer all of your burning questions. Here’s a checklist of everything you need to get started:

Don’t rush to quit your full-time job

Before we get into it, we’d like to acknowledge that not everyone has this luxury. It could be because you were unexpectedly let go or you simply couldn’t continue to work at your job any longer. But if you are able to stick around: Test-drive freelancing on the side first. “Figure out your bare minimum that you have to make in order to go out on your own and do freelance full-time,” says Pascarella. “The best way to do that is to look at what you spent in the last year and divide it by 12, add that 30% for taxes and that’s the dollar amount you need to make every month.” Plus, there are lots of little expenses getting your business off the ground, from building a website to creating a social presence and getting the proper equipment (like a new laptop, phone or standing desk). Your full-time job can help fund that.

Plus, it gives you time to “start putting your name out there, securing work and planting those seeds, so that as you step into full-time freelancing entrepreneurship, you have opportunities available to you from a variety of places, and you’re not just relying on one sole source of income or one sole client,” adds Rapley.

Have some money saved up first

“For someone who works in a traditional role, I’d consider 3-6 months of expenses to be sufficient, but for someone jumping into freelancing full-time, getting as close to 6 months of expenses as possible will be a lifeline in those first few months,” suggests Dunlap. Basically, the more, the better. “If you’re worried about financial security, put as much padding in place as possible with your emergency fund.” Otherwise, the joy you feel from freelancing is quickly going to be wiped away by all of the money stress you’re feeling, says Pascarella.

Register your business—even if you’re the only employee

This is one of the easiest things you can do—and one of the first things you should do when starting your business. Create a Limited Liability Company (LLC) which is going to limit your liability and allow your business to have its own credit score (super important if you want to hire people and take out loans), according to Pascarella. “You’ll pay less in taxes, and it just looks more professional when you’re going out to get business,” she adds.

Separate your business and personal expenses

“Most people, when they start freelancing, they’ll actually put all of it into their personal bank account, and it’s a nightmare because it makes everything so much more complex,” says Pascarella. Imagine this: You’re reviewing your income at the end of the month and you realize you came up short. Was it that impulse Ssense haul (darn you, Alexander McQueen boots that were on sale)? Or did sales just not come through? Having this distinction is key. We’re talking separate bank accounts, separate Excel sheets, separate taxes. Speaking of…

Don’t forget about freelancer taxes

When you’re working for a company, they take care of this for you by taking taxes directly off of your paycheck. But when you work for yourself, you have to take this into account and set money aside, advises Pascarella. If you don’t, you’ll get hit with an unexpected (and expensive) tax bill that you might not have accounted for. Put at least 30% of your monthly income into a separate bank account. Treat it like an emergency fund. Do not touch it!

Let technology do the heavy lifting

Our motto? There’s probably an app for that—so, instead of doing literally every single mundane task yourself (ain’t nobody got time for that), these platforms can help you stay on top of things. Pascarella recommends three kinds of tools: one for task management (like Trello, ClickUp, Asana or AirTable), one for client relations (like HoneyBook, which lets you invoice, send proposals and send contracts) and one for finances (like QuickBooks or TurboTax).

Invest in a good accountant

When you’re first starting out, your finances should be simple enough that you don’t need one, but once things ramp up and you’re making a consistent income, things might get too complicated to manage yourself, so it’s best to call in back-up. “A good accountant will be worth their weight in gold,” says Dunlap. “It’s also important to remember that paying an accountant is a write-off in and of itself. I don’t know anyone who’s regretted investing in a good one.” It also allows you to focus on other parts of your business, from growth to content creation, rather than dealing with receipts for hours on end.

But what if you can’t afford an accountant? “You should at least have some type of software processing your incoming payments and outgoing payments (like QuickBooks),” says Rapley. “As you begin to grow, you need to at least have a relationship with an accountant. You might not need to pay them monthly until you can afford to, but they can make sure that, at the bare minimum, you’re in compliance and file your taxes for you.”

Charge what you’re worth

This is probably the most important one on the list. “Do research before you set your prices and see what’s out in the market,” advises Pascarella. And quantify your time. How much money would you ideally like to make per month? Factor in how much time per day you need to work (realistically, we do about 5 hours of productive work per day). Then, take into consideration vacation time, time off, appointments, etc. and basically reverse engineer how much you should charge per hour, explains Pascarella. And remember: “Whatever you think you’re worth—ask for more,” says Dunlap. “I know so many incredibly talented freelancers who undercharge because they’re afraid to negotiate or lose the business entirely.”