It’s the end of another year and that means it’s time to make financial plans and goals for next year. Most of the financial advice you’ll read this time of year revolves around getting your taxes together. But, there’s more for freelancers to think about. Reflect on what you’ve done well and not so well this year, and decide what you’ll do differently next year.
Evaluate your rates
The start of a new year is a good time to implement rate changes. Most businesses do it, especially insurance companies (bummer). And if your cost of living increases in the next year, you might have to raise your rates to sustain your life. Use a rate calculator to decide if next year's expenses require a rate increase.
Set your income goal
Look at what you earned this year and, based on that, decide whether you want to increase your income next year. Income planning goes perfectly with rate planning since you may have to raise your rates to meet your income goal. I typically try to increase my income 5% or more each year and so far it looks like I've met that goal.
Target a new customer base
If you decide to raise your rates, your current customer base may not stick around to pay higher rates. You may have to target a different market, e.g. blogging for an individual vs. blogging for a big company. I’ve wanted to get into magazine writing for years, but I’ve never taken the time to make it happen. The new year is a good time to work on that goal.
Budget better
As a self-employed worker, I find it critical to plan and stick to a budget since my monthly income isn’t “guaranteed.” Plus, I write about personal finance, so it’d be hypocritical not to take my own advice. You can smooth out some of the financial bumps you experienced this year, by budgeting your income next year. Work on creating a buffer account if you don't already have one.
Adjust your tax deductions
Earlier this year, I mentioned a downside to deducting business expenses – it lowers the income that lenders use to decide whether you can afford a loan. While you may enjoy lower taxes now, you may get turned down for a mortgage or business loan because your "on paper" income isn't high enough. Lenders usually ask to see three years of tax returns, so think ahead.
Review your policies
While they may not be rigid or even documented, we all have policies regarding rates, pay, and work turnaround. If you haven’t established a written policy, this is a good time to do so. And, if you already have a written policy, review it to confirm that you’ll continue to operate the same way next year. Your policy may be more of a flexible guideline than a standard rule, but it’s still good to have a document you to which you can refer to answer client questions.
You can make most changes to your business any time during the year, but the end of the year is a good time to take a break and reassess. Do you changes planned for next year?