Lots of people want to be freelance translators, but they often don’t consider the business side of things—specifically the finance.
This article will go over some things you need to consider when setting yourself up as a freelance translator, including tracking your invoices and payments (your income and expenditure), and making sure you put aside your taxes.
Disclaimer: I am not a financial advisor. I do not have any qualifications in financing. I have experience from having to work this out for myself as a freelancer, but if you need financial advice, please seek a professional!
Calculate Monthly Income and Expenses
The first eight months I worked as a freelancer, I was in the red. I was making less money than I was spending. Luckily, I had savings from when I worked in-house before going freelance, but those were dwindling quickly (especially when I had to get dental work done in the USA.)
I knew I was in the red because I was tracking my income and expenditure.
Keeping track of my income and expenditure was incredibly useful. I could immediately see what luxuries I could cut, and also where I needed to take better paying translation jobs. (My first two years of translation work were heavily supported by website and marketing translation which pays much better than entertainment translation.)
You don’t need any fancy tools or software; Excel is a great way to track your finances.
If you use Excel, create columns with the following for each month:
- Rent
- Bills
- Food (this was always a rough number for me)
- Taxes
- Savings/emergency funds
- Medical (if you live in the USA or somewhere else with private healthcare)
- Other essentials (e.g. pets)
- Fun
- Business expenses
And include columns that show your incoming money:
- Your income
- Partner’s income
Track Your Business Expenses
I also made sure I had a separate tab in my income and expenditure Excel that listed all my business expenses. This included what the expense was, when I bought it, and where I had the receipt/evidence for it.
Business-related expenses might be:
- Internet bills
- Business cards
- Books and courses for professional development
- Flights, hotels, and tickets for industry events
As a freelance translator you are running your own business, which means business expenses are tax deductible. This varies depending on where you live so investigate the rules regarding freelance work and what is tax deductible in your home country/state.
Keep track of up-coming events or courses that you might like to attend, as well. You can then get a better idea of if you can afford them, and set aside money to cover these costs if you need to.
Create an Invoice Template and Numbering System
As a freelance business you should create an invoice template allowing you to easily quote and invoice clients. These are easy to make with Word or free template programs online.
Numbering and organizing your invoices helps you keep track of them when you need to reference an invoice later. I put the date the invoice was sent at the start of the invoice e.g. 20201229 (Dec 29, 2020), which kept them in chronological order.
Track Your Jobs and Invoices
All freelancers should set up a system to track their invoices.
Has a job been finished? Have you sent the invoice? Has the invoice been paid? If payment is late, have you e-mailed the company asking about payment? Do you have a late payment fee setup?
It can be incredibly easy to lose track of who’s paid what when you’re busy. But you really don’t want to miss out on a payment from a client!
When I freelanced I tracked all of the jobs I had been requested to do in Excel. Who requested the job, the deadline, whether the task was complete, etc. Then once the job was done I would send an invoice out to the client and add the invoice number (the date I sent it) to my tracking sheet and also when I expected the payment to be made in another column.
This allowed me to keep an eye on any outstanding invoices. It also helped me track if a client was often late. It only happened once but one client who was late by a year and that told me to never work with them again.
Immediately Put Away for Taxes
Your income tax will vary depending on where you live (again, you should research this yourself!), but I highly recommend that every time you’re paid, you put a percentage of that aside for taxes.
When you work in-house your employer will normally calculate and withhold your taxes, but as a freelancer, you have to do that yourself. And it can be very easy to forget that you need to put aside a portion of that money for the tax man.
When I freelanced I set up a business bank account and a savings account. My income went into my business account and then I put 20% of that into the savings account for taxes. I didn’t need 20% but I wanted to make sure I had a buffer, just in case.
Savings and Emergency Funds
Setting aside your tax money so you don’t accidentally spend it is a good idea, but don’t forget about other savings or an emergency fund.
This might be a little more difficult to do, depending on the field of translation you work in *cough*entertainment translation*cough* but if you can set aside a little money each paycheck for a rainy day, then I highly recommend it.
Get an Accountant (If You Can)
If you don’t like financing and think you can make more money working instead of calculating and tracking your finances, then I suggest looking into hiring an accountant to track the numbers for you.
I never hired an accountant myself, but I do know people who do because they don’t like accounting. Paying an accounting fee it worth it for them because it allows them to spend more time focusing on work which covers the costs of the accountant.
This might be worth looking into if you think this might be a good option.
Learn More About Business from Other Freelancers
When I freelanced I learned everything I could about succeeding as a freelance translator from others, and financing was often a topic of conversation. This helped me form good business practices, which I try to pass onto others.
Here are some places you can go to learn more about freelance translation.
- Smart Habits for Translators (podcast)
- Success by RX (courses and webinars)
- Training for Translators
⇒ Keeping your freelance finances in order
⇒ What’s the best way to increase your income?
It’s always good to keep an eye out for the latest advice from professionals.
Finances as a freelancer is a bit of a headache, but in the long run it really helps to keep them organized.
You can see where you can cut cheap clients or when you need to raise your rates to match inflation. And when taxes roll around you won’t be scrambling around for that one bit of information that you swear you put somewhere.
Definitely do your own research into when and how taxes are paid in your country/region as well as other things like accountants and bank accounts. As I said, I am not a financial advisor, you should always seek a professional if you need advice!
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Freelance Entertainment Translators: Finding Clients, Writing Cover e-mails, Resumes
How To Turn Down a Translation Job
Smart Habits for Translators – Podcast Review
