It’s late in the afternoon, I go downstairs to check the mail and low and behold, I’ve been paid—HOORAY. A check is there, written out to my business and I’m ready to mobile deposit it into my account. No matter how big or small the check is, this is an exciting day—someone is paying me for my services and that alone is pretty cool.
This is where things start to take a turn. You know you can’t take home every penny that you earn—there are taxes, business expenses and other things that you need to consider before you draw money out for your own personal use.
I’ve used a few different strategies for giving myself a salary in the past and I’ve figured out what works really well for me. Here’s how I pay myself through my freelance business.
Twice Per Month: I only draw money out of my business for personal use twice per month. I pay myself on the same day that my husband gets paid bi-weekly through his full-time job. This makes it easy for us to budget our money together and it also keeps our finances organized. I used to draw money out almost every time I got paid from completing a project and it became too difficult to keep track of.
25% For Taxes: Out of EVERY SINGLE check that I get, I immediately put 25% in a separate account. This is the money that is stashed away for paying my quarterly tax payments. QuickBooks estimates how much I need to pay the government which ensures I’m never surprised.
10% Business Expenses: I keep anywhere from 5-10% inside my business checking account to pay for expenses. Things like website hosting, marketing, software, internet costs and office supplies are all things that need to be paid regularly to keep my business up and running. I also like to keep a small buffer in here in case I need to meet a client out for coffee or lunch, as all of these costs can be expensed.
Take Home 65%: I transfer 65% of what I make every month, split into two payments into our personal checking account. This is of course used for bills, fun, savings and whatever else we need for our household. You’ll notice that 65% is A LOT less than the original 100% of what you bring in.
It’s been really important for me to figure out a good solution for paying myself. I want to be sure I’m running this business well, investing in it and moving it forward all while being able to afford living life.
How you set your prices go hand in hand with paying yourself as a freelancer. As you can see, there are a lot of things to consider which is why pricing your services correctly is so important.
How do you (or plan to) pay yourself when yourself employed? Comment below =)
Thanks for Reading,