Bookkeeping Tips for New Freelance Writers

Freelance writing is a unique career path, and as such, it can take some getting used to. One of the most significant adjustments you’ll need to make as a freelance writer is learning to track your earnings, budget your income, and track deductible expenses so that you aren’t burdened by a huge challenge when it’s time to file your taxes. These basic bookkeeping steps may not be familiar to you if you’re used to working a traditional job, where your employer withholds your tax debt from your earnings, but it’s an easy adjustment when you implement some good organizational tactics and set a realistic budget with regards to your earnings.

Make a Budget

Any working professional should have a personal budget to avoid overspending, but for freelancers, this is especially important. Your income as a freelance writer may fluctuate, so you need to know the minimum amount of money you can make to stay afloat with your personal and business expenses. You also need to remember to set aside a portion of your income to pay your taxes, since an employer will not be responsible for taking care of this for you. In some cases, freelance writers will land permanent gigs where they fill out W-2s as regular employees, but more often, writers will be considered self-employed or independent contractors. To determine just how much money you need to make as a self-employed writer, you will need to make a budget. Doing this sooner rather than later will help you get out in front of your expenses, instead of trying to play catch up come tax time.

List all of your personal and business expenses.

Making a budget begins with determining where it is that your money goes. As a freelance writer, you must think about both your business expenses and your personal expenses. Personal expenses include things like rent, food, clothing, and leisure, while business expenses may include your internet service, certain computer software, and other essentials you need to work. List every expense that you currently have as well as those you see coming up in the future. This will give you the clearest idea of what you need to be earning, so you can apply to the writing gigs that will be most worth your time and effort.

Determine what you can and can’t live without.

Now that you have a basic budget for your expenses, you should look at areas where you can cut back your spending. This will come in handy if you ever have a lull in writing assignments or you have some unexpected financial burdens arise. If, for example, you are spending $100 each month going out to coffee shops to work, you might try to make more use of a home office setup where you can reduce your food and drink spending.

Keep detailed records of your deductible expenses.

Being self-employed means that you have to provide all the resources you need to work for yourself, where other professionals would get those resources from their employers. Because of this, there are opportunities to deduct certain expenses on your taxes, which can make your end-of-the-year tax obligation much more manageable. However, the more deductions you claim on your taxes, the more likely the IRS is to verify those expenses, so you need to keep thorough records of any business-related expenses and be sure that every expense you deduct is directly related to your business. Things that you may be able to deduct include internet, physical supplies like paper and ink, your computer and any necessary software for your writing (including your Writers Work membership), business cards and other marketing expenses, and anything else that is considered “ordinary and necessary” to doing business. You may also qualify for a home office deduction as well as the self-employed health insurance deduction, if you meet certain criteria with your home office setup and pay for your own health insurance.

Set aside tax funds with each paycheck you get.

One of the biggest bookkeeping errors that beginner freelancers make is not setting aside sufficient funds for paying taxes. When you get your first few paychecks, you may feel excited that your freelance career is getting off the ground, and it can be easy to get wrapped up in that excitement and spend the entire paycheck. Instead, make a habit of setting aside a portion of each check you get, regardless of the amount. Set a goal to save about 20% of each check. Then, you should have no problem paying the amount you owe when you file your taxes—15.3% of your freelance income, also known as the self-employment tax.

Use Professional Software to Stay Organized

Each of the steps above should be ongoing goals, not just one-time assessments. And that means that you will need to stay organized. You can do this on your own with spreadsheets or even handwritten bookkeeping, but it’s much easier (and often more accurate) to use professional bookkeeping software designed for self-employed individuals. The cost of software can vary, but there is likely a solution that fits your budget. Check out Xero, Wave Accounting, FreshBooks, QuickBooks, or Kashoo for some options. Once you do find the right software to track your expenses, you can deduct the cost of the software as part of your business expenses!

Know Which Jobs Are Worth Your Time

Freelancers have the freedom to pick and choose which jobs they take, and it’s more than just a matter of personal taste that will help you decide. The amount you’re earning will also play a role, but you must remember to consider how much of that pay will actually end up in your wallet after taxes and other expenses. Don’t wait until after you’ve landed a gig to think about how it will impact your finances and your schedule. Be vigilant about this information upfront, and you will save yourself tons of stress later on.

If you are looking to get into freelance writing, Writers Work can help you get started with easy job-finding tools and resources to help improve your writing skills. We make it easy to manage your new career, so you can focus on your writing and the tasks that will make you more successful.