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With the rise of the gig economy, freelancing has grown in popularity in Nigeria and has become a viable career option for most professionals. The reason for its popularity, especially among the younger population, is because of the opportunity to work with clients worldwide, and the chance to earn a living on one’s terms. Whether you’re new to freelancing or have been in the game for a while, mastering your finances can make a significant difference in your career’s sustainability and growth. This article provides a guide to help you better manage your financial journey as a freelancer in Nigeria.
1. Budget Wisely and Stick to It
Being that landing freelancing is highly unpredictable, as a freelancer, your income can fluctuate from month to month. It is therefore wise to create and stick to a budget. Budgeting is not just about cutting costs, it’s about knowing where your money is coming from, where it is going, and making sure you’re prepared for leaner months. So, to get started, calculate your monthly expenses, including rent, utilities, groceries, transportation, and any business-related costs. Once you have a clear picture of your expenses, determine your minimum income requirement to cover these costs. Any earnings above this amount should be allocated towards savings and investments.2. Set Up an Emergency Fund
One of the most important financial tips for freelancers is to build an emergency fund. This is your safety net for periods when work is slow or unexpected expenses arise. Aim to save at least three to six months’ worth of living expenses. This fund will give you peace of mind and prevent you from falling into debt when your income is low. Also, it will help you ensure you don’t go below your standard pricing for your skill. The secret is to start small, and gradually increase your contributions as your income grows. You can agree to set aside a certain percentage of all income coming to you, and consistently stick to this over time.3. Separate Personal and Business Finances
Due to the absence of a corporate structure, freelancers commonly make the mistake of mixing personal and business finances. To avoid confusion and maintain clarity, it’s important to separate the two. Open a separate bank account specifically for your freelancing income and expenses.Sign up for the Connect Nigeria daily newsletter
You can register a business with the Corporate Affairs Commission (CAC) and with it set up a bank account for your freelancing business. See yourself as an employee of your company and pay yourself a salary or wage from time to time. This separation makes it easier to track your business expenses, manage taxes, and understand your financial position. It also helps you maintain a professional approach to your freelancing career.
4. Plan for Taxes
Unlike salaried employees, you are responsible for managing your taxes as a freelancer. So, it’s important to understand your tax obligations and set aside a portion of your income for taxes. As a freelancer in Nigeria, you are required by law to pay Personal Income Tax (PIT) on your earnings to the Federal Inland Revenue Service (FIRS). This tax can be paid through the Pay-As-You-Earn (PAYE) scheme or via direct assessment.5. Invest in Your Financial Education
Financial literacy is important to your success as a freelancer. The more you know about managing your money, the better equipped you’ll be to make informed decisions. Invest time in learning about personal finance, tax management, and investment opportunities. There are numerous resources available online, including blogs, podcasts, and online courses that can help you improve your financial knowledge. The more informed you are, the better you’ll be at managing your finances and growing your freelancing business.6. Diversify Your Income Streams
One of the disadvantages of freelancing is probably the absence of job security. This is why relying on a single source of income can be risky for you as a freelancer. Diversifying your income streams can provide more financial stability. So, explore different freelancing platforms, offer various services, or even consider passive income options like online courses or digital products. This will ensure that you’re not overly reliant on one client or income source, reducing the risk of financial instability.7. Invest for the Future
Freelancing doesn’t come with the benefits of a corporate job, such as insurance or pension plans. It’s up to you to plan for your future. Consider taking out relevant insurance coverages for yourself such as health insurance. Also, set up a retirement account or begin exploring other investment options such as stocks, bonds, or real estate. The key is to start early and invest consistently. Even small, regular contributions can grow significantly over time, providing you with financial security in the future.Register to attend the CN Business Mixer
8. Keep Learning and Upskilling
The freelancing landscape is highly competitive, and staying relevant is key to maintaining a steady income. Continuously invest in your skills and knowledge to increase your earning potential. Whether it’s taking online courses, attending workshops, or earning certifications, upskilling can open doors to higher-paying opportunities and new markets. Remember, the more valuable your skills, the more you can charge for your services. This, in turn, makes it easier to achieve financial stability and growth as a freelancer.Featured Image Source: Business Elite Africa
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