Freelancers: Learn how to get your money right

Hanna Horvath Headshot


Hanna Horvath, CFP®

Hanna Horvath, CFP®

Managing Editor & Certified Financial Planner™

Hanna Horvath, CFP®, is a certified financial planner and former managing editor at Policygenius. Her work has also been featured in NBC News, Business Insider, Inc. Magazine, CNBC, Best Company, and HerMoney.

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Becoming a freelancer can be challenging, especially when you’re just getting started. But there are benefits: You typically have flexible hours and can choose which projects you pursue.

“I didn’t want to keep working from 8 a.m. to 5 p.m. until I retire or die,” said Kat Boogaard, a freelance writer. “I work more now than I ever did full time, but I am more in control of my schedule.”

While it can be nice to be your own boss, freelancing often means paying extra attention to your finances. Money is one of the biggest hurdles to overcome when deciding to become a freelancer. Whether you are just starting out or have been self-employed for some time, here’s a comprehensive money guide.

Getting started as a freelancer

First, figure out how much you’re making by tracking your income in a spreadsheet. Knowing roughly how much you earn throughout the year can help you prepare for busy and slow times throughout the year. Get started with this downloadable budgeting sheet.

“The early days, getting everything up and running was hard,” said Boogaard. “I was very paranoid about money. I had heard horror stories of people who didn’t manage their money correctly.”

Not staying on top of your money as a freelancer can put you in debt, especially when you don’t rely on a steady stream of income.

“You should have that infrastructure so that every time you get paid you know how much to save,” said Joseph D'Agnese, co-author of “The Money Book for Freelancers, Part-Timers, and the Self-Employed,” with his wife Denise Kiernan.

Many freelancers face the "feast or famine syndrome," Boogaard said, going to and from being extremely busy and having too few projects. Both come with their own problems. If you have too much on your plate, you may make mistakes or not deliver on your work. If you have too little, you could fall behind on your bills.

How to budget when you’re a freelancer

  • Make a budget and stick to it to keep track of your money over time.

  • Consider multiple bank accounts. Having a separate account for money for taxes or savings will make you less likely to spend it.

  • Pay off any debts. This includes credit card debt and student loans. One popular way to tackle debt is the “snowball method,” where you pay off the smallest debts first and work your way up.

  • Save up for the unexpected. A good rule of thumb is to have three to six months of expenses in an emergency fund. A high-interest savings account is a good option to stash your money.

  • Start building your nest egg. Though you don’t have access to a workplace-sponsored 401(k), you should still save for retirement. You can put up to $6,000 pre-tax each year into an individual retirement account. Learn how to open one.

Another option is to set up a simplified employee pension. You can contribute up to 25% of your earnings into an SEP.

How to do health benefits as a freelancer

“Homeowners insurance and renters insurance are typically inexpensive,” said D'Agnese. “Health insurance is freaking not. You need to be saving steadily to afford it.”

While most full-time employees receive health insurance through their employer, freelancers can get health benefits a number of ways:

  • Federal programs. Those over 65 can get Medicare. Depending on your income and other factors, you may be able to get Medicaid or insurance through the federal marketplace at If you purchase insurance through, you may qualify for subsidies, depending on your estimated income. Here’s a state-by-state guide to open enrollment.

  • Your parents or spouse. If you are under 26, you can stay on one of your parent’s health insurance plans. If you are married, you qualify as a dependent under your spouse’s insurance.

  • Private high deductible health plan. If you are a relatively healthy adult, this may be the most affordable health insurance option. If you have one of these plans, it may be useful to also open a health savings account, which helps cover out-of-pocket medical expenses. You can put up to $3,500 as an individual or $7,000 as a family into an HSA. Note: If you’re over 55, you get to put an additional $1,000 as a “catch-up” contribution. All contributions are pre-tax, which lowers your overall taxable income. Learn how to open an HSA.

Common mistakes freelancers make

One of the biggest things to keep in mind as a freelancer is staying on top of your expenses, particularly taxes. While full-time employees have their taxes taken out of their paycheck each month, freelancers have to estimate how much they owe and save up for taxes throughout the year. You are responsible for making tax payments quarterly and annually.

If you are self-employed, you may be able to deduct work-related expenses from your taxes. Here’s a guide to doing your taxes as a freelancer.

D'Agnese said ideally you want to pay exactly what you owe or even more than what you owe. There’s nothing worse than getting a surprise tax bill.

“Actually paying your taxes is not hard. You’re just filling out the form,” said Boogaard. “The hard part is the psychological factor of paying thousands of dollars of what feels like your own money to the government.”

Before you file, make sure you have everything together, like these documents. Boogaard recommends getting an accountant to help you.

Finding success in freelancing means striking a balance between finding work that pays enough but doesn’t overwhelm your schedule. D'Agnese said it’s a challenge for almost all freelancers.

“Everyone who has a full-time job has a built-in system. Their employer takes the money out,” he said. “You have to be the one who’s taking care of yourself. You’re the HR department, you’re the accounting department — it’s all up to you.”

Looking for more advice? Here’s our guide to surviving your first year as a freelancer, as well as Millo's guide to becoming a freelancer in 8 steps.

Image: Fredrica Galli

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