While most people might think that freelancing is a one-way ticket to easy street, real freelancers know that the minute you step away from a regular job, you begin wearing an infinite number of ‘hats’ - all at once. Everything from CEO to Chief Marketing Officer, Bookkeeper and Customer Support.

With these unique responsibilities comes some unique financial challenges. Here are some tips and tricks to help you match your professional dreams with your financial realities. With careful planning - you won’t have to choose between the two!

Four Essential Survival Habits

Making the leap from a full-time job to freelance work requires you to develop new financial habits that make sense for your new lifestyle. Developing these healthy habits early in in your freelance career can help you achieve your professional dreams, without sacrificing your financial wellness.

1. Embrace Honesty

While it might have been easy to act like a ‘financial ostrich’ while you were working at a steady job, with reliable pay, benefits, and a 401(k) plan, that bad habit has no place in your new life. As a freelancer, complete and accurate information about your finances will be your best friend. It is essential that you have a strong understanding of your monthly expenses, but don’t forget to look ahead and account for upcoming major expenses like holiday shopping, or first and last month’s rent if you anticipate moving. This will help you determine how much work you need to actively seek out in order to cover your expenses.

2. Make Debt a Priority

While it may be tempting in the lean months to stray from your debt repayment plan, it will cause greater stress in the long-term to defer debt repayment. Also, if you’re heavily in debt, it might be wise to maintain some level of full or part-time work in addition to your freelancing while you pay off your debts.

3. Plan Ahead

Set up an automatic money transfer of a portion of your income into long-term savings each month. This should not be an arbitrary sum of money, rather it should be based on a savings plan that you have created for yourself (perhaps with the help of a financial planner) - that way you can measure your progress against your goals month over month. Also, be sure to set up a dedicated savings account for your taxes.

4. Treat Yourself Like an Employee

Set a bi-weekly ‘income’ that you will pay yourself from your business accounts. This consistency will allow you to plan ahead. Also, by saving surplus income from large contracts, you are protecting yourself during the inevitable lean times.

What? No Corporate Expense Card?

While you might have kissed all the worst parts of your full-time job goodbye when you jumped ship for the freelance life, you also bid farewell to expense cards, benefit plans, and employee perks. This means that you are now responsible for everything from insurance to printer paper, and careful management of your expenses is essential to the long-term viability of your business.

Here are seven things that you need to consider when managing your professional expenses:

1. Purchase health insurance, since you will no longer be covered by your employer, and you need to protect yourself and your family in the case of illness
2. When setting your fees, be sure to take into account your additional expenses (health insurance, supplies, etc.)
3. Keep your professional and personal bank accounts separate. Keep track of your general expenses and your client-related expenses using online services, but be sure to back up all hard-copy receipts with an electronic or scanned copy.
4. If you work from home, be sure to research opportunities for tax deductions for home office workers.
5. If you are looking for an office, consider a community coworking space, instead. They are more affordable and come with built-in networking opportunities.
6. Price-compare your software - there are many comparable open-source programs available at a fraction of the cost of brand-name products
7. A great alternative to hiring contractors is to barter with other freelance professionals. For example, a graphic designer and a social media consultant could exchange a logo for having company Facebook and Twitter accounts set up. This is a great way to keep your costs down while building your network.

By taking the time early on in your business to set up processes and systems for managing your costs and expenses, you will have built the foundation for a solid freelance enterprise, allowing you to focus your energies on the most important thing - producing great work!

Get Back to Business 101

As a freelancer, your long-term income security is dependent on your ability to create a sustainable, revenue-generating business. While your business might be offering graphic design services, your job is to make money for yourself, and your business.

Part of this is charging a fair price and never under-valuing your services. If you do not feel that an offer on the table is fair, be prepared to negotiate fair compensation. Also, do not be afraid to increase your rates to adjust for increased expenses, or your increased experience and credibility.

While it is wise to offer some pro-bono work when you are just starting out, do not allow yourself to be pressured by friends and family to provide them with free services if you can’t make room for the project without negatively impacting your bottom line. As a freelancer, you are operating a business and you need to value your time accordingly.

Valuing your time as a business owner means ruthlessly prioritizing your tasks. If your business is growing faster than you can handle, consider hiring a virtual assistant or bringing on an intern from a local college to handle administrative tasks, allowing you to focus your time on more lucrative activities

And finally, be sure to join networks for business owners in your community, like your local chamber of commerce. In addition to being a great way to network and promote your business, many groups offer free workshops on things like branding, taxation, and budgeting. Your business will thank you for it!

Like the old saying goes “do what you love, and you’ll never work a day in your life”. While that is certainly true, staying on top of our financial health while we pursue our life dreams will enable us to reach a little higher, and dream a little bigger.

What is your best money tip for freelancers? Be sure to comment and share your thoughts!