The money questions every freelancer asks

This is the question behind almost all money stress. You see the money come in, but by the end of the month it's gone — and you can't quite pinpoint where it went. The problem is rarely the amount itself, but the lack of visibility: small fixed costs and forgotten subscriptions quietly eat up hundreds of dollars a month on average.

The solution is simple: every month, put all your income next to all your costs, line by line. As soon as you see that 'software and subscriptions' costs $180 instead of the $40 you assumed, you can do something about it. Begrootlab does exactly this: one sheet with income and costs, and per line item what you budgeted versus what you actually spent.

Depending on your state, you may owe sales tax on what you invoice, and you'll owe federal (and often state) quarterly estimated taxes on your net income. A simple rule of thumb: set aside 25-30% of your net income for the IRS, and check your state's sales tax rate separately if it applies to your services.

The biggest risk isn't the calculation, it's that the money is already spent by the time your tax bill is due. So as soon as you get paid, move the tax portion into a separate savings account. In Begrootlab you see, per quarter, exactly how much should be in your tax buffer, based on your own numbers.

As a self-employed person you pay income tax on your profit: revenue minus business expenses. On top of that comes self-employment tax (around 15.3%) for Social Security and Medicare. It's different for everyone, but a rough estimate is enough to avoid surprises.

Calculate conservatively: expect a significant part of your profit to go to taxes. What you should definitely do is set money aside every month. In the planner we calculate an indication based on your profit and show per quarter how much you should have saved up.

Your hourly rate isn't what you're 'worth', it's what you need: your personal expenses plus your business expenses plus taxes, divided by the number of hours you actually bill. That last part is the surprise: out of a 40-hour week, you're typically only billable for 25 to 30 hours, because the rest goes to sales, admin and travel time.

And don't forget you have no employer pension and no paid leave: vacation weeks, sick days and slow periods all come out of your own rate. So calculate with fewer billable hours than your gut tells you. In Begrootlab you enter your costs, time off and hours, and see the net monthly amount your rate delivers.

The real test of a budget isn't the average month, it's the leanest one. In summer, around the holidays or during a quiet sales period, revenue can drop significantly while your fixed costs keep running. Anyone who only plans around the average runs into trouble in those months.

So make an annual forecast: your expected revenue per month, with your own seasonal pattern. This way you'll see in advance which months will be tight and how much you need to set aside in good months to cover it. Begrootlab plots your year in a chart and explicitly names your leanest month.

Freelancers generally need three separate buffers: one for taxes (income tax and self-employment tax), one for a personal safety net (three to six months of fixed costs) and one for goals like a new laptop, training or retirement savings. Mixing it all in one account almost always means the tax money disappears first.

Work it out: what's left of your profit each month after personal draws and tax buffers are deducted, and how do you split that across the buffers? In the planner you see your savings room as a percentage, and you can create goals with an amount and a deadline, so you know exactly what to transfer each month.

There's no employer paying into your retirement. You build it up yourself, typically through an IRA or Solo 401(k) (tax-advantaged, but locked until retirement age) or simply through savings you keep liquid. Most freelancers do almost nothing — and that's the most expensive choice there is.

You don't have to be perfect: start with a fixed monthly amount, however small, and increase it as your profit grows. Treat it as a line item in your budget, not as 'whatever's left over'. In Begrootlab you list your retirement reserve among your costs, so your rate and your balance automatically account for it.

Not by cutting what you really need, but by finding the items you forgot about. Sort your cost items by size and ask yourself for each one: did I actually use this in the past month? Subscriptions you haven't opened in months, duplicate insurance policies and services you once needed but no longer do — that's where the money is.

That's why a budget with planned vs. actual works so well: you've decided in advance what something should cost, and every month you see in black and white where you deviate. Deviating is fine — but do it consciously.

Add up your personal costs (rent, groceries, insurance, leisure), add your business costs, add your tax buffers, and divide by the number of months. That number is your 'break-even revenue': everything above it is growth, everything below it drains your buffer. Almost every freelancer underestimates this number, because the tax buffers and unpaid hours aren't included.

Once you know this number, finding new business becomes concrete: not 'I need more clients', but 'I need two more $750 assignments per month'. In your budget you see your balance per month right away, so you always know how far you are from break-even.

Yes — a budget is not bookkeeping. Your budget is forward-looking: what do I expect to earn and spend, and can I steer by that? Your bookkeeping is backward-looking: what was actually invoiced and paid, and what do I need to report to the IRS?

What a budget does give you is a smoother conversation with your accountant or bank: you can show you know your numbers, that you've set money aside for taxes, and that you know what your leanest month costs. That saves on advisory fees and helps with a loan application. Download your plan as a PDF and send it along.