If you’re one of the many freelancers and small business owners asking yourself “Why am I bad with money?”, know that you’re not alone. This feeling is something I come across so often among my mentees, and it’s such a shame because it simply isn’t true.

Usually, my mentees say they started off well. At the beginning of running their own businesses, they were recording the important things and noting down how much they were earning for each project. But then client work got in the way… And we all know how that ends: a continuous cycle of getting through one job, moving on to the next, and never having enough time to take a step back and assess the overall situation.

When my mentees come to me, more often than not, they feel overwhelmed by their business finances. They’re unsure where to start in order to get on top of things and find themselves actively avoiding looking at the numbers in their business. They also frequently believe they’re bad with money, either because that’s how they feel or because it’s what they’ve been told by other people. This results in gifted individuals genuinely believing they’re bad business owners, which couldn’t be further from the truth!

If you think about it, it’s only natural if the financial side of things isn’t our number one priority. We build our businesses based on our skills and passions, so it’s only normal if we focus on these rather than our bottom line. In this blog post, I want to address the common misconception that many freelancers and small business owners have of being bad with their finances. And I’m also going to tell you what you can do to stop feeling that way!

Why am I bad with money?

The first thing to clarify is that you aren’t! I strongly believe that no one is inherently bad with money, but I do think it’s difficult for someone to be good with money if they’ve never been shown how to manage it. It’s like expecting yourself to be an accomplished pianist as soon as there’s a piano in front of you; these things take time and need to be learnt. You don’t just wake up one day with an innate ability to manage your business finances efficiently!

Especially if you find yourself not knowing where to start, it’s important to start somewhere. I always say that familiarity breeds confidence, and the more you look at the numbers in your business, the more familiar they’ll feel to you.

Often freelancers and small business owners think they have a money mindset issue. It’s true that a lot of people struggle with their mindset around money, but knowing how to practically organise things can make such a difference.

Sometimes, rather than changing our mindset, it’s about discovering what we can practically do to stay on top of our numbers, finding what works for us, and understanding what we’re able to manage consistently as individuals. Just because we wouldn’t necessarily organise our business finances in the same way an accountant or someone else would, that doesn’t mean we’re bad at it - it just means we have a different way of doing things that fits with our business and our unique way of working.

So now we’ve established that you’re not bad with your finances, the question is: how do you go about learning how to manage them, and what can you do to organise your finances better?

Freelance money management

1) Set up a separate business bank account

If you don’t already have one, I can’t overstress the importance of having a separate bank account for your business finances. Not only will this make it easier for you to keep track of your business finances and prepare your tax returns, it will also help make things clearer in your own mind.

2) Create a budget for your small business

This is one of the first things I usually get my mentees to do. Creating a budget for your business expenses can make a real difference to the way you approach your business and the decisions you make.

If you’d like to get started, you can download my free business budgeting spreadsheet, which comes complete with instructions on how to use it. By coming up with a budget for your business, you’ll feel more in control of your finances and will be more likely to make conscious spending decisions moving forwards.

3) Associate time with money

Associating time with money and putting a value on the hours you spend on client work will help you make sure you’re not having to work all the time to make ends meet.

Having a minimum hourly rate based on your expenses and the number of hours you want to work each week will enable you to view client projects in a different light. It’ll mean that you’re always earning enough per hour to make each job worth your while, and this in turn will allow you to emerge from that vicious cycle of working non-stop because you’re scared to leave money on the table.

4) Keep track of your income and expenditure

When you know exactly how much money is coming into and going out of your business at all times, you’ll feel so much more in control of your finances.

If you’d like some help with this, you can find my free income and expenditure spreadsheet here. Recording your income and expenditure will give you a clear overview of your business’s financial health, but better still, when you have a system in place that allows you to analyse the data and understand where the majority of your income is coming from or what you’re spending on, it’ll help you make strategic decisions for the future.

5) Keep on top of your invoicing

This sounds like an obvious one, but sending out invoices often gets pushed to the bottom of our to-do lists. Our clients aren’t in a rush to pay, and our admin won’t be going anywhere! But the whole point of running a business is to earn money. So make sure you get paid for any work you do, and always chase up those invoices that are overdue!

6) Schedule weekly/monthly check-ins

As I mentioned earlier, looking at the numbers in your business little and often is key to building familiarity and confidence when it comes to your finances. 

It’s important to understand what you can maintain consistently, whether that’s small weekly check-ins, more in-depth monthly ones, or both! Whatever you decide, keeping on top of your figures on a frequent basis will help you feel more in control of your business finances.

I hope you’ll find these tips useful to help you get your finances in order and put processes in place that you’ll be able to maintain. If you’re in need of some inspiration and would like to see what a difference this can make, have a read of Ana’s case study. She found that learning how to manage her finances in a way that works for her has changed how she thinks about money and reduced the mental noise surrounding it.

If you’d like to get rid of some of the mental noise around your finances, you might find a Custom 1:1 Mentoring call useful. We’ll tailor the session to fit your needs, whether you’d benefit from support to carry out a business review or advice on what you should be tracking to get your finances in order. After all, how can you be good with your finances if you’ve never been shown how to manage them?

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