When you are in the field of freelancing business, it is of utmost importance to draw a line between your personal & business life, especially the financial matters. When I myself first ventured into freelancing business, I did read quite a bit on the pros & cons of maintaining separate bank accounts for my personal & business related stuff.
Listed below are few suggestions for maintaining a distinct difference between business and personal finances:
1. Separate bank account
Get a new bank account for your business needs, I suggest, with your same existing bank where you have personal account. Chances are the business account might be free with some additional benefits attached to it. Managing both the accounts on-line is a lot easier with money transfers through internet banking. On the lighter side, your business check will really look impressive too.
2. Monthly funds transfer
Every month, pay yourself a particular amount. Though it might initially seem as an unnecessary process, you will realize later that it helps you in maintaining consistency and have all the payment records. Once you reach a point where your income and expenses are steady, it will be much easier to keep the track of the financial matters. Also, during a slowdown of business, you can a bit relaxed, as you have already maintained a sound balance.
3. Tax deductible expenses
Most probably the amount that you would spend from your business account will not attract tax, meaning, you can claim tax return on this amount at the year’s end. This itself makes a lot of sense to keep the business accounts always separate. This way you can be sure of never missing to show all the tax deductible expenses.
Maintain discipline when it comes to funding your personal account. It will be tempting to draw extra money from your business account when your personal account balance will be low. But, be careful, if you do this quite often you are risking yourself from the possibility of showing fewer expenses! This habit could land you in a vicious cycle of unnecessary money transfer and you could lose it. Another way of tackling this issue is, you could give yourself a raise in your monthly funds transfer. But before doing this, first analyze! Do I really need a raise? Is my business doing consistently well and having a surplus? Am I draining my business funds? So, decide if you really need a raise! Check also, Tips on How To Create a Budget.
5. Have incentive plans
Set specific and measurable business goals for yourself. And when you do accomplish your targets, give yourself a bonus for that month. This is an effective way to keep yourself constantly motivated. But beware, give yourself bonuses within the limits.
6. Plan, Plan & Plan
Planning is the keyword for success. No matter how confident you are about your business, planning will always help you during a slowdown of business. Follow the same mantra with your personal finances too; this will ensure that you don’t unnecessarily start funding your personal account from the business one.