Stylist’s financial therapy series tackles real issues from women about their financial matters. Each week sees a new issue discussed with a financial expert to destigmatise the way we talk about money - this week it’s dealing with questions surrounding your finances when you go freelance. Lisa Conway-Hughes, chartered financial adviser and founder of misslolly.com tackles freelance digital content manager Sylvia Crouch’s question about how to keep your savings healthy when your income isn’t set each month…
“I started freelancing last year following a run of full-time employment.
Lots of things attracted me to the freelance life – mainly the freedom and the flexibility. And while I don’t regret my decision, financially I feel a little bit lost.
The main problem I have is tracking tax and making sure I’m putting the right amount away each month. I wish I had a way of calculating exactly what I need to save. At the moment, I’m doing it manually.
Another worry is being out of work for any period of time, and then being on the back foot financially. I constantly feel like I’m trying to save – for tax, for weeks where I don’t have a booking, and all this while trying to maintain a social life.
I dream of buying a property, but know there are implications if you’re a freelancer. What can I do to get on top of things and feel more confident about my financial future?”
“There are a few things to consider that will help you plan for your future…”
1. Ask yourself some questions
When it comes to freelancing, I always think some honest questions need to be asked.
Are you making enough to justify being freelance? And, when you take into account your previous salary, pension payments and any other benefits, are you any better off?
If the answer is no, and you do have dreams of owning a house, perhaps a few more years in full-time employment will serve you better financially.
Secondly, if getting on the property ladder is important, are you being sensible with your budget? There may be cutbacks you can make in the short-term to help you save more.
Speak to a mortgage broker. They’ll be able to give you an idea of what you can borrow based on your earnings and what you’ll need to afford your home.
2. Think in percentages
With regards to setting money aside for tax, it’s always worth putting away more than you’ll need.
If you’re a basic-rate tax-payer (as in, you earn £50,000 or less), I’d set aside 30% for tax and National Insurance.
If you’re a high-rate tax-payer, set aside 45%.
This way, each year you’ll have a surplus to make a lump-sum contribution into your pension.
3. Plan for your pension regardless
Set up monthly savings and pension contributions at levels you know are realistic – don’t just wait until you’re earning more.
Then at the end of each tax year, work out if you have any spare to top-up your pension pot. An accountant can offer guidance on how to stay as tax-efficient as possible.
4. Cast a safety net
When you were employed, it’s likely you had some sick pay and/or an income protection, so that if you couldn’t work due to illness you’d still receive a regular salary.
This is something you can do yourself now that you’re freelance.
Income-protection plans can pay out a tax-free amount each month if you suddenly find yourself ill and unable to work.”
NatWest’s business growth enabler Rochelle Tomlin and Vicky Stevens give their top freelancing tips:
“Switching from permanent employee to freelancer offers many rewards, but it makes managing finances a little trickier.
Don’t panic, though – there’s lots of help out there. Otegha Uwagba’s Little Black Book is a great read for those starting life as a freelancer – it’s packed with tips on how to manage your time and your budget.
Some good online accounting software will also work out your tax as you go, so you’ll know how much to set aside. If you’re a NatWest Business customer, you can use FreeAgent for free.
Check that you’re charging enough for your time, as you need to cover your costs, including a pension and sick pay. The FreeAgent website has lots of advice on this.
Finally, if you’re saving for property, book in for a free Financial Health Check. You can arrange online or in-branch, and one of our specialists can help you decide how you can make the most of your money and begin saving for a home.”
For more support around financial issues, join A Woman’s Worth Collective - a space created by Stylist and NatWest for women to talk to each other and experts about what they can be doing to improve their financial wellbeing - with no judgments or biases.
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