Starting your own freelancing business might seem like an easy feat with gig economy platforms such as Fiverr and Upwork. As a freelancer, you have the freedom to choose your own working hours and workload. However, before embarking on this journey, it is important to understand the ins and outs of money management for your freelance business. In this Freelancer’s Money Management Guide, we will go through essential aspects of financial management for freelancers in Malaysia and what you need to know before quitting your job.

One of the top concerns for freelancers is irregular income. Some months may be busy and profitable, while others may be slow with little to no income. As a freelancer, it is crucial to be mindful of how you manage your finances to avoid overestimating your income and ending up with excessive debt. Financial planning also ensures that you have enough savings for your future and retirement.

Managing your finances as a freelancer can be challenging and requires discipline and planning. Here are some points to consider to help you plan your cash flow and build a successful business.

As a freelancer, you have the opportunity to break away from the conventional 9-5 job, but it’s important to set financial goals before starting your own business. Having specific and realistic financial goals will help you stay focused and motivated to keep growing your business. Your goals can be broken down into smaller ones that are achievable within a specific reasonable time frame.

Separating your personal and business finances allows you to have a clearer picture of where your business stands. With this insights, you can identify which areas need improvement to increase your revenue. Furthermore, this helps to ease the hassles of tax filing. Open a business account that allows you to track your income and business expenses. Some banks in Malaysia offer business accounts with low minimum balances, making it easier for freelancers to manage their finances. In addition, most banks offer the convenience of online account opening which save you the troubles of waiting in queue.

Due to the nature of freelancing, you may not have a steady stream of income like a salaried employee. This might make it difficult for you to plan and budget for your expenses. Nonetheless, you can tackle this by building an emergency fund. Define the conditions under which you can draw on this fund and be disciplined. This fund can help you tide over slower months and unexpected expenses. Aim to save at least six months’ worth of expenses for your rainy day. The Covid-19 pandemic has highlighted the importance of having an emergency fund, as many businesses were hit and went bust due to insufficient cash flow.

Unfortunately, due to low financial literacy in Malaysia, many freelancers neglect the importance of insurance coverage. This is one of the most important component for freelancer’s money management.
As a freelancer, you need to foot your own medical bills. Even though Malaysia has government hospitals that offer affordable healthcare, unexpected medical conditions can lead to a loss of income during your recovery period. Worse still, you may need to dig into your life savings to save your life. Such setback may need you to work beyond retirement to rebuild your finances. In fact, you can mitigate such unexpected costs by purchasing health insurance or critical illness insurance. This can help you financially during difficult times and ensure that you can continue working and growing your business.

As freelancers are not obliged to contribute to the Employees Provident Fund (EPF), you need to set aside a portion of your income as your nest egg. Saving and investing to build your retirement fund is crucial for a comfortable and worry-free retirement. You can contribute voluntarily to the EPF under the i-Saraan scheme or invest in Private Retirement Funds.

One of the less exciting aspects of being a freelancer is dealing with taxes. It’s essential to keep records of your business income and expenses for ease of tax filing during tax season. Consider hiring a tax professional or using online tools to help you stay organized. Wave, and Quickbooks are some of the accounting apps that can help you streamline this process. Remember to ensure that you take advantage of all available tax deductions.

Managing your finances as a freelancer can be challenging, especially if you’re just starting out. It’s okay to admit that you may not have all the answers when it comes to financial planning. Talk to a financial planner or join online communities for freelancers to learn from others’ experiences and gain insights into best practices. Seeking advice can help you make better-informed decisions.

Undoubtedly, freelancing can be a fulfilling career path that offers flexibility and independence. However, it’s crucial to remember that good financial management is a essential component of long-term success. A solid understanding on business financial planning, especially on cash flow, will set you ahead to business success and sustainability. Taking into consideration of this, you can pave the way for financial freedom and prosperous future as a freelancer or gig worker.