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Financial management tips for freelancers

Maya Hayakawa

The labour landscape is more flexible than ever. And because of the flexibility it offers, more people are moving towards freelancing, banking on short term contracts to eke out a living.

While freelancers are making a considerable amount of money, they face the challenge of financial security as their income is inconsistent. Here are some tips that can help freelancers pay close attention to their cash flow to avoid being shackled by debt:


Running a successful freelance business banks on having constant cash flow. The challenge with this segment is the difficulty to determine when the money you come across will hit your bank account.

You can add some kind of structure and control over money by setting milestone payments for your services, which requires clients to pay certain amounts at different stages of the project.

Clients would be required to make each milestone payment before you continue with the project. This technique helps in ensuring consistent cash flow and solves non-payment and collection problems.


The advantage of being in full time employment is that in most cases, employers are tasked with the responsibility of ensuring your taxes are fully honoured, unlike freelance business where the responsibility falls on you. Do not forget your tax obligations.

Before you embark on going freelance full-time, be sure to know all the taxes that apply to your business. Business permits and fees are also important to consider before moving proceeding any payment or service. Plan ahead and avoid the last minute rush.

Consider paying your taxes quarterly, monthly or even as per project to make these payments more manageable. Always factor in these tax payments in the pricing of your services.


Now that you no longer have employers to put you up on a pension scheme, you need to be more deliberate and proactive in creating your own retirement plan. Consistently invest 20 per cent of your income into retirement.

It’s a good idea for you to schedule automatic transfers from your account to your retirement funds to keep your savings plan in check. Consider boosting your savings with windfalls, such as tax refunds, big client payments or any other situation that allows you to do so.


Do you have an idea of how much you earned last week? Or last month? Or do you make and spend money without tracking or realising it? A lot of freelancers have no idea how much they make.

While it may feel like income is inconsistent, tracking cash earned may identify trends and patterns that can help you manage your income. Having a historical view of your income can give insight on when your peak months are, when you can expect slow times and who your important or repeat clients are.


It’s easy to feel out of control when you are a freelancer. Today you may earn Sh5,000 and tomorrow Sh100,000. With money coming in irregularly, budgeting might seem like an impossible task.

Regardless of the unpredictability of your income, there are still fixed bills you have to pay, and therefore must figure out a way to budget.

You can do this by calculating the average you make in a month and subtracting your expenses from that amount to help you set your budget. A budget will help add some structure in management of your finances and will help you avoid impulse buying.


About 20 per cent of full time freelancers according to a report by Upwork, are uninsured. This can lead to extreme financial distress especially in the unfortunate event that you have a medical condition, accident or health emergency.

Make sure that you cushion yourself against these events so the effects do not become as catastrophic. The basic covers to consider are health, car and life insurances.


Building your assets is a strategy to help you ensure you have an income in the future. Freelancers tend to have the habit of only paying attention to their current active income sources.

They concentrate on adding more clients, mastering new skills and making more money. While this is a good thing, focusing too much on this leaves out opportunities to build assets that can earn you passive income.

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