Ah, the joys of being a freelance writer–the ability to make your own hours, work from home, and be selective with regard to the work you take on.
One of the more important but less glamorous aspects of freelance writing is the financial management component. Managing your budget against a generally unpredictable and fluctuating income can be a challenge, and then of course there is the quarterly tax exercise one has to endure.
One of the financial benefits, however, of being a freelancer, is that much of what you spend money on can be written off when it comes time for doing your taxes. Sometimes the tracking of these expenses can be a little bit challenging, though, and as a result, many freelancers lose money because they forget about expenses they are able to write off.
Since keeping receipts for every single item can seem cumbersome, what we propose in this article is the idea of keeping a separate credit card for your business expenses.
Here are a couple of great reasons for doing so.
Use your cash for personal expenses.
One thing freelancers don’t typically have is the luxury of a regular biweekly paycheck as full-timers generally do. Payments from customers can be erratic, which has a freelancer managing his/her cash flow more closely.
By getting a separate credit card for business expenses, you can save your cash on hand for things that are important to your personal life like paying your rent in a timely manner and buying your groceries. With the credit card, you can take clients out for lunch, buy office supplies, and pay for other work-related expenses like gas and your cell phone bill.
Itemization of expenses is easier at tax time.
Freelancers have to do their taxes with greater frequency than a full-time employee at a company does. Every quarter, when it’s time to do taxes, it will be far easier if you have an already itemized list of expenses on your credit card if you use your credit card for business expenses.
Using it only for business expenses ensures that no errant charges get included when you go to do your taxes–it is far easier to keep these expenses separate than to have to cull through the credit card charges every month and determine which expenses were personal and which were business-related. You then also don’t have to keep a mound of receipts around.
In general, it absolutely makes sense to get a separate credit card for your freelance business. You can reserve your cash flow for high priority personal expenses like food and rent, and can much more easily track business expenses. This will come in quite handy when at the end of each quarter itemization becomes important.
Of course, this all rests on your having credit that is strong enough to obtain a credit card, so be sure to pay off those monthly bills in a timely manner, and check your credit score before trying to obtain a new one. Alternately, if you have more than one already, you could always just designate one of the cards as work-only.
This method of expense tracking will only really work if you are a solo freelancer, if you decide to expand or start your own business you may need to look at software like Workday’s financial applications.
Cara Aley is a freelance writer who writes about a variety of topics, from analyzing gutter styles to digital marketing strategy.