Is your freelance writing business netting you more money than what’s needed to pay the bills? It’s not a bad problem to have. Here are some ways you can spend that extra money.
Make sure you set aside enough for taxes.
If you’re earning more than you expected, you may also owe more taxes than you expected. Update your estimated tax calculation and set aside some additional funds if you need to. Pay at least your estimated taxes, i.e. what you paid last year, and you shouldn’t face any underpayment penalties if you happen owe at tax time. Having some extra money in a “tax fund” can help just in case you have a tax bill.
Contribute to your emergency fund.
The ideal emergency fund is worth six to twelve months of your living expenses. When you have the opportunity, contribute a few hundred dollars to your emergency fund, especially if you’ve had to dip into it. You never know when something’s going to come up. My emergency fund has come in handy a few times – with car issues and natural disasters. I was extremely thankful to have had the money set aside.
Grow your business.
Big businesses commonly reinvest profits to help the business grow. Here are some things you can do. Upgrade your website. Hire other writers. Pay an assistant to help with non-writing work a few hours a week. Enroll in a writing or business class. Last year, I wrote about reinvesting money in your writing business and others chimed in that attending conferences or joining trade organizations were other ways to improve your writing business.
Purchase new productivity tools.
You could upgrade your computer. Get the latest version of Word. Upgrade to a smartphone. Purchase a tablet. Buy a piece of software for writing, time management, financial planning, or the myriad of other tasks we do. There are two great benefits to spending money on your business – your business improves and the expenses is tax deductible.
Save up for retirement.
There are calculations that help you figure out how much you need to save for retirement, but I’m not sure you can ever save enough money for retirement. If you don’t have anything else to spend your extra money on, you can always stick it in your retirement fund. Certain retirement contributions are tax-deductible.
Pay off your debt.
I dream of the day I’m no longer paying student loans. Putting extra money toward those loans is speeding up the day that I’ll be rid of the loans for good. Getting rid of monthly debt can make freelance life so much easier by eliminating a financial obligation. Plus, the money that was spent on debt can be used to accomplish another financial goal.
Spend some, but not too much of it.
What fun would life be if you only spent money on emergency funds and credit card bills. Blah. I’m annoyed just thinking about it. You work hard, it’s ok to enjoy your money sometimes. But, everything in moderation, as they say. Splurge a little, maybe 5% or 10% of the extra money you’ve earned, and be a good steward of the rest.
You don’t always have to do the same thing with your extra money. This month, you may put some extra toward debt and the next month maybe purchase something to help you be more productive.