Becoming a freelancer in the UAE is finally being recognized as an alternative form of employment with the government putting in place measures to help freelancers in Dubai work legally. Free zones like Ajman free zone, Dubai Silicon Oasis, and twofour54 Abu Dhabi are some of the areas that have been established to help freelancers launch their freelancing career in the UAE. Therefore, if you have been contemplating becoming a freelancer, you should start the process immediately. You can start your freelance career while still working a full-time job as you build your profile to help you overcome money flow issues.
Your chance of getting a job as a freelancer highly depends on your profile and skills. It is easier to start a freelancing career in the line of industry you are experienced by tapping your networks. However, if you are lost on where to start, you should enroll for online freelancing training courses that can help you prepare for a successful freelancing career. As a freelancer, one of the biggest challenges that you will experience apart from acquiring new clients is managing your money. Unlike in the formal employment where you get paid at the end month, freelancing payments can be unpredictable. Some clients will pay some jobs upfront; others may pay in milestones while others will pay upon the completion of the project.
The different payment timelines make it difficult for most freelancers to plan for their money, which makes it imperative for every freelancer to demonstrate good money discipline. You should also learn how UAE freelancers cope with unstable finances as it will help you stay financially stable. Like any business, you must plan for the bad times, you must pay your bills and taxes, and you must save for your future. In this article, we will help you smoothly transition into a freelancer by helping you manage your money for a more satisfying and jovial life.
3 Money Managing Tips That Will Help You Manage Your Freelancing Money In 2020
1. Track your income
Your first activity should be to have the numbers. How much money are you bringing as a freelancer in the UAE? For example, do you know how much money you earned last week or last month? Is it the same as you earned in the same period last year? If you do not know how much you earned, you are not alone, but that is not good enough. While some freelancers think that the unpredictable nature of freelancing payments makes it impossible to manage their income, in reality, it is possible to manage their income with a little more effort. You can start by having a historical view of your income, giving more importance to repeat clients.
You should treat income from repeat customers or seasonal projects as your main income. You can even go ahead and have a different account for your regular income, as it can help you enjoy some financial stability in irregular freelancing career. You can also use apps like Mint or simple spreadsheets like Google Sheets to help you manage your budget.
2. Pay your taxes
If you are operating in one of the freelancing free zones in the UAE, this step may not be necessary, but you must check with the authorities to ensure that you are not required to pay taxes on your income. Some areas only exempt income from special categories, and thus, any other income you make may be subject to taxes. The type of license you have may also affect your tax obligations. A freelancing license has a unique set of guidelines that are different from the general trading license and thus, you must keep in mind all your tax obligations. With clear information, you can use online calculators like the Neuvoo tax calculator to help you determine your actual tax obligation.
3. Create a budget
Once you have paid up your tax obligations, the remaining amount of money is what you should budget. It is helpful to have a formula that you should always use to help you allocate your budget. For example, you can use a method like 50/30/20 to help you allocate your budget towards different applications. In this 50/30/20 method, you set 50-percent of your after-tax income for necessities, 30-percent for effects that you would like but cannot be described as a necessity and the remaining 20-percent for savings and paying down your debts. You should not feel limited to using that formula; you can alter it to suit your current money needs.
Things that you should include in your budget include:
- Primary needs: In this category, you should factor your food expenses, clothing, and rent. Things that are also necessary for you to work like an electricity bill and internet bill belong to this category.
- Short term emergencies: Anything can happen in this industry. Your client could be unable to send payment on the set date. Your car could also break down in between payments. Saving for short term emergencies will help you overcome short-term emergencies without bothering your friends and relatives.
- Retirement: It is good to have a retirement plan to cater for your old age. You can set a specific amount of your after-tax income, like 15 percent, as part of your retirement plan.
- Pay your debts: Carrying debt is not good, especially if it is accruing high interest. You can save a lot by paying off your bad debts and thus, you should plan to clear them based on their interest rates. Those that accrue high interest like payday loans should be on top of your list.
- Save for long term emergencies: Since freelancing is a global business, happenings in one part of the world can impact the life of a freelancer. You also do not know how soon you will land another gig once you complete your task. As a freelancer, you should always work to have a six months cushion of your basic needs to help you in times of difficulty.
- Insurance: You should have in place medical insurance as the bare minimum. You should also consider other types of insurance covers that you need, like car insurance, life insurance, and property insurance.
Freelancing is a highly rewarding venture that is capable of meeting all your financial obligations. However, you must put in place measures that will help you manage money as the industry is highly unpredictable. You can be overwhelmed by work this month, but struggle to get jobs the following month. Therefore, the success of a freelancer in the UAE depends on how well you manage your money during the high seasons when you have adequate jobs. If you are finding it difficult to sustain yourself, you should consider raising your rates.