So you’re thinking of going freelance? Or maybe you’re already a freelancer and have been trying to bury your head in the sand over finances. You wouldn’t be the first.

Finances are rarely anyone’s favourite topic, unless you’re becoming a freelance accountant. This is something you need to get clued up on right now if you have any hope of making it as a freelancer. Some common problems facing freelancers are:

Pensions

As freelancers you need to consider how you will save for your future because you don’t have company pension plans or auto-enrolment to fall back on. Your National Insurance contribution is affected, and so is your pension entitlement. You are essentially on your own.

Most people are guilty of not thinking enough about pensions. It can be difficult to see yourself ever needing one. Many young people, faced with an unstable job market and brought up online have turned to freelancing as both a solution and a good use of their skills. However, anyone in their early 20s is unlikely to be giving pensions a second thought. This is where you’re going wrong.

Organised freelancers plan for their future. Some split each fee they earn from clients. They will put aside a percentage for tax, expenses, living costs and pensions. It can be hard to see where your profit will come from. This is why you need to be charging enough to cover all of these areas. You don’t have the benefits of working for a company so you shouldn’t be asking for a company wage.

Mortgages

Since the economic crash of 2008, it has become harder for people to get a mortgage. It’s even harder for freelancers. The mortgage lenders take one look at your lack of stable work and show you the door. You need to think more carefully about how you approach lenders.

You will need to save as much as possible for your deposit, more than other people would. You also need to fully commit to growing your business, if you haven’t already. Though freelance work will never be as predictable as normal work, you can still work towards keeping a steady stream of work coming in. You will still have quiet periods, but hopefully your busier ones will cover you. You need to market your services constantly, even when you’re fully booked. It’s best to have your income spread over various sources so that if one disappears you’re not faced with financial disaster. You need to treat your work as a business, not just a freelance venture. You need to think about how you can always add value so that you can raise your rate again and again.

Parental leave

Self-employed people are at a disadvantage when it comes to starting a family. Any time you take off is money lost. There is no support if you need time off from your work to have a child. Freelance work can be well suited to new parents because of the flexibility it offers. It can also be a risky period as profits inevitably fall as you’re able to spend less time growing your business. So far the government has ignored calls to address this issue, though organisations such as IPSE are still campaigning. Currently freelance parents have no choice but to build up savings or rely on a partner’s wage to cover this time.

Sick days

One of the perks of going freelance is that you usually work at home and can choose your own hours. While flexibility is great, you need structure and working hours in order for you to get the most out of your day. So when illness hits, it can be tempting to just brush work off and promise to catch up on it later. However, you are probably losing money by not working. You don’t have the same support of a company behind you. You don’t work, you don’t get paid in the freelance world.

This, like many of the other issues mentioned above means that freelancers need to have an emergency fund. No matter how great your business is, how healthy you are, or how you don’t plan to have children, all freelancers should have a back-up fund should things go wrong. Arguably, everyone should have this, even those in supposedly steady jobs. Anything can change, it can’t hurt to be prepared.

Tips for managing your money

• Separate your personal and business finances. This will help you to understand exactly how much your business is costing vs how much it’s making you. Plus it’s good for your sanity.

• Even before you start taking money in, you should come up with a solid system for keeping track of your cash flow. You can use software to track where your money is going and where it’s coming from. You should keep a close eye on your expenses and keep them as low as possible when starting out. Keep a note of everything you spend on your business as you can get tax relief.

• Don’t forget taxes. Most people leave them to the last minute, all of them regret it. Don’t be one of them. If in doubt, hire an accountant. You should try to find one who specialises in freelancers so you can get the best advice relevant for your business.

What other financial concerns should freelancers bear in mind? Share your thoughts in the comments below.