What you need to know about managing money as new freelancer

February 10, 2025

You’re still working on getting those all important first invoices lined up and now - after a little bit of late night Googling ''how much money you can earn, and what to do with it, as a new freelancer'' - you’re overwhelmed by the thought of wrangling spreadsheets and apps, on top of everything else. You’re not even off the ground yet and the looming spectre of HMRC is keeping you awake, thanks to those online scare stories about tax rules, demands, and regulations

How to overcome the feast and famine cycle, from day one

The importance of money management is dawning on you and taking all the fun out of what should be an exciting leap into a more creative and free-wheeling way of working. It turns out that the first thing you need to do as a freelancer is get money savvy. Not the sexiest or most creative sounding element to tackle, but...

What if I told you that keeping track of the money, once it starts flowing in, can be simple and fun?

What if I told you that this actually is one of the joys of becoming a business owner (I know you don’t feel like one right now, but every day you’ll get closer to that) instead of being employed and a slave to your paycheck?

Managing money well as a freelancer, from day 1, can help you overcome that feast and famine cycle. Read on to find out how to keep your dreams in focus, with savvy money management. It’s time to get to know your business numbers story.

Myths about money management

First things first, let’s sort the wheat from the chaff, when it comes to money management stories. Myths and legends have no place here.

It’s not true that money never lasts (how many times have you been told it doesn’t grow on trees?) That you’ll be saddled with credit card debt forever more. That you need to be nose to the grindstone, working hard for your money. Or that there’s any shame in struggling to figure this stuff out.

Money is not the root of all evil. Yes, it can lead to greed and encourage the gambler to chase the £££s, but when you prioritise your needs and plan for your desires, you reach for your dream future, without risking the now.

Money is constantly flowing, it can feel easeful. With a solid plan you’ll overcome any debt. Money management is something we should all be talking about.

If you want to talk money in a judgement-free environment, where no question is too silly, no worry irrelevant, you should check out the Accountability Accounting Club.

You first : a different approach to money management

There’s a piece of advice you might have seen tossed around quite liberally on the topic of money management, and that’s to have 3-6 months of savings to fall back on. But what does that really mean? You need context. You need the complete story to figure this out.

So, the first thing you need to know is how much you need to live your life today, as a minimum and as an ideal scenario. Then you need to look at how much you need to be earning to make those dreams a reality - and look at this by years e.g. if I earn this much in year 1, I can do such and such, but if I earn this much, I can do that sooner. Figure out paying yourself first, then look at expenses. On that note, you might have come across Mike Michaelowicz’ Profit First and his “pots” method. It’s all about building a habit around, and relationship with, your money. It’s about really getting to know your numbers story. And it’s about getting out of the survival trap - the old feast and famine cycle - so you can really thrive as a business owner. No-one wants to feel like Bilbo Baggins - like butter scraped over too much bread. You can take all the nasty surprises out of dealing with money; you can be prepared for just about anything.

I’m a big fan of this method and, though I may not follow it to the letter, the idea is to have “pots” for:

Paying yourself
Everyday expenses
Future expenses (the annual bills)
Tax
Profit

As you get paid, allocate a percentage of the income to each of your pots. By doing this, you can pay yourself monthly from 'your' pot, knowing you still have money in your other pots to cover business costs, save for your tax liability, etc. And hopefully you’ll have some extra £££s in your profit pot to divvy up once or twice year, between yourself and investing in your business.

Now you’ve got the basic running numbers (the minimum income level needed to be able to pay yourself and cover business expenses), add an allowance for how much tax you’ll need to pay. There’s a handy breakdown of this here .

The difference good money management makes

Remember those days of store cards and interest free balance transfer credit cards? Where, if you signed up for a card, you got a free gift (which 9 times in 10 turned out to be not as good as promised)? Well, once upon a time I was hook, line, and sinker for those. That was me - spending money on the card, willy-nilly and only paying the minimum balances each month because it was so easy. Until it wasn’t.

There I was, shuffling debts between credit cards (to avoid the interest) and barely making a dent in the balance, for all the hassle. Oh the stress, the fear of missing a payment, or the debt collectors coming knocking. I wouldn’t wish it on my arch nemesis. And I definitely don’t want that for you when it comes to your business finances.

But it taught me a lot about money management. I clawed my way out of that hole with budgeting, learning to put money aside for a rainy day, and I gradually chipped away at those card balances. It felt like a weight had been lifted as I walked onto the plane debt-free,for that first holiday I treated myself to when I ended my own money nightmare.

Key take-aways

There are a lot of myths around money and money management, but you get to write your own money story now, you don’t need to carry these old out-of-date legends with you as a freelancer. If you get the financial foundations set now, you’ll be charging more, earning more, and realising your dreams much sooner. The best way to do this is to build a money management habit, and I like to base this around the Profit First “pots” system. Prioritise your needs now, pay yourself first, and plan for your desires.

It’s scary and a bit deflating, making The Big Leap out of the 9-5; after the initial buzz wears off, you’re left with wide-eyed panic about how to make ends meet. And spend too long online looking for wise words from people who “get it” and you’ll find yourself even more stressed out; why do they all keep talking about how normal the feast and famine cycle is? Did you really just unwittingly just sign up for chasing pounds and endless late nights? Money Mentoring and knowing your business numbers story could change everything for you.

Your spot in the Accountability Accounting Club will be opening up soon . In the meantime, join the short numbers story challenge , to be introduced to the key characters of your business numbers story. You’ll get 4 days of bite-sized tasks to help you get on top of your bookkeeping and accounting, straight to your inbox. Plus, you’ll get regular newsletters - and be first in the know when the club is ready for you.