freelanceswitch: "As a freelancer, it’s incredibly tempting to do everything as cheaply as you can — especially when you’re first starting out. That can include just running client payments and business expenses through your personal checking account, rather than taking the time to get a business checking account.
Even if you’re only freelancing part-time, though, I’d encourage you to open a business checking account and get serious about separating your personal finances from your business finances.
5 comments:
He makes very compelling points about separating your business and personal accounts, and I tend to agree with him. It's really nice to not have to sort through all of your transactions for the quarter and figure out which expenses are business and which are pleasure. I think the most important point here is that it will make you look and feel like a professional. It's all about mindset, and I think it forms an important distinction between your work life and your personal life, especially if you are a freelancer.
This is sort of the lead up I needed to hear before meeting with the tax man this week. It makes sense how keeping your business a business at least on paper could help you keep yourself separate from the business in your head and in your purchases. Just seeing the different cards in your wallet can help you think consciously about what you'll be using this purchase for. And hopefully help you save money.
There's something to be said for having the experience of paying yourself from the business account to the personal account too. In freelance work, it's very easy to see paychecks coming in as just numbers, especially if the company paying you does an auto-deposit. Paying yourself is a motivation boost, and gives the feeling of actually being tangibly rewarded for your work. If you have enough work coming in and can support the second account, it's only helpful to morale and motivation to work, in addition to the more practical tax and bookkeeping reasons Sam and Elize raise.
Elize makes a good point, even just psychologically this separation would be helpful. Having separate accounts helps one understand that there is money set aside for the company, not that if you buy this computer for your company you might not eat tomorrow. Separation allows for the individual to understand and grasp where the money is coming from and going.
In agreement with the above comments, this is definitely a great idea to keep separate accounts. My mother has run her own business for the past 18 years, and I've seen her go through many different ways of controlling her financial accounts. When she first began, she used to do everything out of her personal account, but after she converted to having a business account, she said it was an incredible amount easier to deal with, as the author of the article stated.
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