Accounting Invoicing

Want to Be An Independent Worker? Here’s How Much You Need to Earn


Personal finance can be a confusing beast for those of us who work in traditional 9 to 5 office environments, so it is hardly a shock that personal finance and invoicing is one of the biggest pain points for independent contractors and freelancers. Working independently as a self-employed professional is, despite this, quickly on the rise as people all around the world ditch their office jobs for a better quality of life and in some cases a much better income.

With multiple sources of revenue and a fluctuating income, however, independent contractors and freelancers can struggle, particularly during their earliest days of operating their own business. At the same time, the lack of a salary cap and freedom to do what you want can lead to a massive growth in income… this is the perfect example of a double-edged sword!

The question of “How much do I need to earn per month to be an independent contractor” is asked fairly often, and the answer is simple—as much as you earn. Independent contractor status isn’t dictated by income, it’s dictated by working for yourself.

Managing Personal Finances as a Contractor

Managing your finances as a freelancer, whilst not exactly being fun, doesn’t need to be difficult. There are several tools, best practices and processes you can adopt to make your financial obligations a breeze. Here are some of them:

1. Use good invoicing software

As a freelancer you will generate invoices and you’ll need to do this often. Although it’s fairly simple to type them up using a word processor, this i) doesn’t look professional and ii) offers no additional benefits. Good invoicing software will generate your invoices for you in a pre-set template, keep track of them alongside your income, generate automated invoice for regular clients, and add on late fees. These are just a few of the several useful functions that you can take advantage of with the right invoicing software.

2. Separate personal and business income

Your personal and business finances and assets should be separated, particularly if most of your income comes from freelancing or independent contracting. Why? Because incorporating yourself into a legal company offers you extra levels of protection—this is known as corporate liability—that can prevent you from being personally liable in the unlikely event that you are sued. In a nutshell, with your personal and business assets separated, creditors and former clients can’t come after your personal assets and finances.

3. Keep a financial buffer

It’s all too common for independent freelancers and contractors to live from one paycheck to the other. Whether this is out of financial difficulties or because of habit, it’s something that needs to be sorted out. It’s bad enough that freelancers’ incomes fluctuate wildly, and it can really help to have a financial buffer in place that can see you through unexpected outgoings or periods of slow work. It is good practice to set aside as much money as is physically possible to establish a financial safety net.

4. Keep on top of your taxes

One place where many freelancers and independent contractors fall down is with taxes. Not saving enough money to cover your tax bill and either putting off completing your tax return or forgetting to do it entirely are two common mistakes that can land you in big trouble, both legally and financially. Nobody likes paying taxes, but it’s got to be done. Again, using decent invoicing software to track your income and then utilizing the services of a qualified accountant towards the end of the financial year is all you need to do to ensure your taxes are completed correctly and on time.

Your Finances Needn’t Be a Struggle

Going from the comfort of traditional full-time work to freelancing is a huge learning curve, and part of this curve is financial management. By using robust invoicing software and being aware of your financial obligations, you can avoid many of the hardships that lots of freelancers and contractors face when it comes to financial management. If you don’t keep on top of your finances and properly manage your obligations, you could find yourself facing some serious problems further down the line, especially at the end of a tax year.

Javi Fondevila
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