How to Protect Your Credit If You’re a Freelancer

May 3rd, 2017 | Author:

[B]ecoming a freelancer where you can work from home is a dream for many. It allows them the flexibility of making their schedule fit their life instead of working 9 to 5 and gives them the freedom to do what they want and be their own boss. However, it can also cost them financially if they aren’t careful. Here are some ways to make good financial decisions and protect your credit if you decide to become a freelancer.

Save Money

Before you quit your day job, put money in savings. Ideally, you should have about six months of expenses in savings. Even if you are already earning money on the side as a freelancer, it takes some time to get into a routine once you quit your regular job. You may find it hard to work enough to pay all of the bills at first, so a savings account is essential to protect your credit.

Get Credit First

It can often be difficult to get credit as a freelancer, especially with a home loan or car loan. If you plan to buy a house or vehicle, do that before quitting your job. You’ll find the process easier and you won’t have to go through as many lenders and credit checks to qualify.

Earn More than You Need

Create a budget for how much money you need to earn, and then work to earn more than that amount. Why? Because you won’t always get paid on time or have a regular pay schedule like with a traditional job. You’ll need the extra income coming in to make sure your bills are paid on time so you don’t hurt your credit with late payments.

Pay Ahead

Before you quit your day job, try to pay your bills ahead by a month. This gives you some room if a client doesn’t pay you right away. You don’t have to worry about being 30 days late on your car loan because you’re waiting on a payment. Of course, this won’t work with every account, so you just might have to put the extra in your bank account.

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