You have taken the leap into freelancing or starting your own business, amazing! Next on your to-do list is figuring out how to handle your money. Between irregular income, pricing your services, and making sure you don’t run out of cash, I don’t want you to feel overwhelmed.

Managing your finances when you are just starting out can feel like a puzzle with missing pieces. Therefore, I put together a step-by-step explanation down below where you find the crucial steps to take so you can set yourself up for financial success from day one. Or something you can always refer to if you are falling into a little financial chaos. 

1. Set Up Your Bank Accounts the Right Way 

This is the very first step, because one of the biggest mistakes new freelancers and business owners make is keeping all their money in one account. Not only does this make things messy, but it also makes tax season a nightmare. Here is how to set up your accounts properly:

To keep your finances clear and organized, you should have at least three accounts:

• Business Checking Account: This is where all your client payments go and where you pay business expenses from. Think of it as the main hub for your business. If you do not have any clients yet, transfer the money you have saved for your business here. 

• Tax Savings Account: Every time you get paid, transfer about 30% of your income into this account so you’re always prepared for taxes. Once you are making money regularly, make sure to pay your estimated taxes on April 15th, June 15th, September 15th, and January 15th. 

• Personal Checking Account: This is the account you most likely have already, you have received your salary here before – just continue to pay yourself into this account. You should transfer your ‘salary’ from your business account to here at regular intervals such as once per month. 

2. How to Calculate Your Business Expenses & Making Sure You Are Not Overspending But Still Investing Enough

Before you dive into organizing your finances, you need to know (at least roughly) how much it costs to run your business. Expenses can be split into two categories: fixed expenses (things you’ll always have to pay) and variable expenses (things that fluctuate or aren’t essential yet).

Fixed Expenses You Might Have as a New Freelancer / Business Owner: 

• Business registration & legal fees:  LLC, S-Corp, contracts, one-time or annual fees

• Software & tools: QuickBooks, Adobe, Zoom, etc., typically monthly

• Website & domain: Usually an annual cost

• Coworking space or home office setup

• Insurance: Business liability or health insurance

Variable Expenses might be:

• Marketing (ads, branding, logo design, website design, etc.)

• Client acquisition costs (networking events, paid listings)

• Courses or education to improve your skills

• Travel for business purposes

  
  

How Much Should You Spend on Expenses?

Of course there are no definite answers, but a general guideline is to keep your business expenses at 30-40% of your revenue when you are just starting out, because that is when you need to make yourself known. However, for many, this is unhelpful advice, because often you don’t make any money in the beginning, therefore: 

Determine Your Startup Budget

• If you have saved $20,000 to launch your business, that is your total budget before you need to start generating income.

• Divide this by how many months you expect it to take before earning consistent, or at least some revenue, factor in your living expenses not covered by any other income, and take about 50%-70% of the rest per month (because nothing happens as expected and this way you are giving yourself a buffer).  

Prioritise essential expenses when you are just starting out. Separate must-haves (website, software, legal setup) from nice-to-haves (perfect branding, coworking space, ads). Try to do as much yourself as possible to get your business up and running. If your savings are limited, focus only on what directly helps you land clients and deliver your service.

3. How to Price Your Services (Without Undercharging Yourself)

Figuring out how much to charge is not an easy task at all. Of course it helps to have a look what competitors are doing, but it is also helpful to figure out what you need to charge based on your needs. To do that, use this simple way to calculate a rate for your service that is pretty helpful and gives you an idea: 

1. Decide how much you want to take home, e.g. your goal is $80,000 per year.

2. Factor in business expenses & taxes, if expenses are $50,000 (roughly 30% of your reveue) and taxes are 30%, your total revenue needs to be around $165,000. If your expenses are less such as $15,000 per year, then you only need to roughly make $130,000. Like I said, these are extremely rough numbers, but they give you an idea. 

3. Then, estimate your billable hours: If you think you will ultimately be able to work 20 client hours per week (880 per year (20 client hours x 46 weeks/year: 4 weeks of vacation, 4 weeks of not working out as planned), your minimum rate should be $187/hour, or $148/hour if your target revenue is $130,000.

For project pricing estimate how many hours a project will take and add 20-30% for unexpected revisions or scope creep.

In the beginning, you might not get the amount of clients you wish you would get, keep the pricing as a starting point and evaluate over time whether you need to adjust up or down. 

 4. Managing Your Income & Expenses When Income is Irregular

When you have months where money flows in and others where it trickles, you need a plan to keep things steady:

Super important at all times: Pay yourself a set salary, even if you make $10K one month and $2K the next, withdraw a fixed amount for personal expenses on a regular basis. This is why you need to set up a buffer fund. The best case scenario is that before you go full-time, save at least 6 months of expenses and build this buffer back as soon as you generate reliable income, so that slow months don’t derail you.

Survival Tip: Avoid spending like you have a steady paycheck. Always budget based on your lowest-income month and only start adapting upwards once your income has been steady for at least 12 months. I would rather want you to have a bigger buffer fund that gives you security and freedom instead of a new car that loses in value. 

5. How to Find Your First Clients When You are Just Starting Out

This is such a difficult answer to give because it depends on what you are doing and where you are at in your life, yet this is the most important question to answer when just starting out. A few tips include: 

• Tap into your existing network and let friends, family, and past colleagues know what you do. Offer an introductory discount to build testimonials.

• Optimize your online presence by creating a simple website or LinkedIn profile showcasing your services.

• Join freelancer marketplaces. Platforms like Upwork, Fiverr, or niche-specific boards might help you land your first projects, even though there are no guarantees.

• Cold outreach by researching potential clients and send them personalized emails offering your services.

• Create content & share your expertise by posting valuable tips on LinkedIn, Instagram, or a blog to attract potential clients.

All of these take time, effort, and much more discipline than one might think. When you are planning your finances, keep in mind that building a business is often not built within a few months, especially if you are not familiar with the industry and have a big network. This is why you rather need a few months more in savings or a job that pays the bills in the beginning. 

6. Tracking Your Money (Without It Feeling Like a Chore)

 You don’t need complicated spreadsheets, but you do need to know how much you are making, how much you are spending, and what is left over. To keep it simple:

• Use free tools like QuickBooks, or even a basic spreadsheet to track income and expenses.

• Review your finances weekly so nothing catches you off guard, you always know where you are standing and see immediately any mistakes. 

• Automate your tax savings, or transfer 30% of all your income each time you are reviewing your finances. 

The more you track, the less stressful money feels, it helps to get familiar with spreadsheets.