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Freelance Finances: Advice on Getting Paid & Managing Money

I’ve been a full-time freelancer for almost 5 years now, and I’ve learned a lot along the way. During my first year, I published How to Go Freelance and Not Starve, and I stand by all of those tips. This article will focus on freelance finances, such as negotiating payment and managing your income.

freelance finances


Prepare for dry spells

This is so important! Freelance finances are more complicated than regular employment because freelance work often comes in waves. You might be working crazy hours and earning a good income one month and then have almost no income the next. Even when you have regular clients, those are never a guarantee. A client who has been sending you steady amounts of work for 6 months could suddenly run into budget issues or change the scope of their work in a way that limits or even eliminates the amount of work they need from you.

I’ve yet to run into any cash flow issues because I take savings accounts very seriously. I never cash a check without calculating how much I need to set aside for taxes and then skimming a little bit more off to squirrel away into my savings account. When it comes to income tax in the US, I err on the side of caution and save 40% of all of my income for tax purposes. Freelance finances and taxes aren’t ideal, but it’s better to plan ahead than to be shocked by your income tax bill come April.

I also use the app Mint to track my spending, tag transactions as tax deductions, and keep an eye on my average income. Mint creates a suggested budget based off your average income, but you can edit it to better suit your lifestyle. I for one budget a lot more for travel than I do for shopping. I also find it oddly satisfying to look at graphs that show my income and savings over time.

Don’t be afraid to ask for payment upfront from new clients

Every single freelancer has been stiffed on an invoice. It’s horrible, but it’s the reality in a world where companies feel comfortable bailing on a contract knowing that freelancers probably don’t have the means to battle it out in court, but that’s a rant for another day.

Whenever possible, I recommend asking for 50% up front from new clients. Not all clients will agree to this for a variety of reasons, so you have to analyze your risk factor and decide if you’re willing to roll the dice. If you’ll be doing long-term work and put on a pay schedule, the company will probably be unable or unwilling to mess with the company-wide pay schedule to accommodate you. If you’re doing a one time project, on the other hand, the company might be more willing to work out a 50% up front payment.

A lot of new freelancers are afraid to ask for upfront payment because they don’t want to scare the client away. I can tell you that I’ve never had a good client bail on me just for asking. The key phrase there is good client. I once had a client who was little iffy on the request, so I decided to go ahead and take on the project because the client was sent to me by one of my best, long-term clients. In the end, it took me a full year to collect on a $350 invoice. I later found out that he had stiffed several contractors due to cash flow issues.

If the client is unable or unwilling to give you any upfront payment, do your research before you take on the project. Search around online to see if you can find any reviews or information about the company or person’s reputation. I often check LinkedIn to see if I have any common connections. More than once I’ve found colleagues or friends who were able tell me about good or bad experiences with the client.

Know your worth and don’t back down.

This can be tough, especially when you really want or need the work. When I first started freelancing, I was quick to negotiate my rates, but I have realized that lowering my rates usually leads to crappier clients. Clients that start out a relationship by asking for a discount often end up being the same clients who change the entire scope of the project halfway through the contract or repeatedly question the hours you put on your invoices.

Last year, a potential client tried to guilt me into lowering my rates. After going over several recommended freelancers, he chose to call me, but was quick to say, “I see your hourly rate is $5 higher than the two other recommended contractors. I’m having a hard time justifying paying that rate.” I responded quickly and simply, “I can tell you that I have been doing this work for a long time and I am extremely good at what I do. I am efficient, and generally get more done in an hour than the average person in this field. My hourly fee is what my work is worth, and I’m sure you will see that should you decide to work with me.”

I landed the client and after our first project together, he wrote me an enthusiastic email saying that I was worth every penny. I have worked with him on several projects since. Standing by your rates shows confidence in your work, and many potential clients will respond to that positively. If you’re quick to negotiate and give discounts, clients may see that as a weakness that they can exploit down the line.


Every year I feel more comfortable managing my freelance finances and I shake my head and the rookie mistakes I made in the beginning that lead to being underpaid, stiffed on invoices, and shocked at my income tax bill. Freelancing is difficult, but it gives me the freedom I want so that I can take spontaneous trips, work while taking a weeklong road trip in Iceland, and take day trips on week days.

3 Responses to Freelance Finances: Advice on Getting Paid & Managing Money

  • Laurie says:

    That is great that you are responsible with the money that you make by saving so much for taxes and also putting some in savings. Love the tips too, thanks for sharing!

  • virtualedge says:

    This is such an interesting read! Having diversity associated with your business is key to success, and that includes clients! Very nicely done. Thanks so much for sharing!

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