10 Financial Tips for Online Creators

The freelance economy is booming and professionalizing, as online creators stake out an increasing part of the market and build strong ecommerce businesses. Very much a career of the modern era, content creation requires both creative skills and a healthy dose of business savvy.

While being an online creator can be very lucrative, you need some smart financial management to make it sustainable in the long term. Like building any kind of business, you can go through highs and lows, but taking proactive steps can give you stability and peace of mind.

Why should online creators prioritize financial health?

Good financial management is important for anyone handling both business and personal expenses, but for online creators it’s even more vital. Income in this industry can be irregular, which can understandably cause some stress – it’s only natural to want to know where the next paycheck is coming from, after all.

Maintain control and peace of mind

An accountability framework can help you keep track of your income and spending, allowing you to maintain control over your finances and make more informed decisions. In doing so, you can alleviate the worry of uncertain cash flow.

Grow your business on your own terms

Consistent financial health is also good for growth, allowing creators to continue investing in their business by upgrading equipment and software, expanding marketing strategies, or even hiring employees.

Plan for future goals

Online creators are essentially self-employed. So it’s especially important to think about future financial security by setting aside money for retirement and other long term goals. In other words, it’s not only about short term solvency, but building a business and a life that’s sustainable in the long term.

Common financial challenges faced by online creators

In our experience serving online businesses over the past 10 years, we’ve seen that creators have some specific financial challenges to manage, such as:

• Irregular income streams due to project-based work
• High initial investment in equipment and software
• Balancing personal and business expenses
• Tax compliance as a digital business and self-employed individual
• Unexpected expenses and financial emergencies
• Investing in business growth while maintaining cashflow
• Pricing services competitively while maintaining profitability

Let’s look at each of these challenges more in depth.

Irregular income streams due to project-based work

The nature of project-based work for online creators means that income tends to fluctuate. In this industry, ongoing projects can mean a creator is working full time, but when those projects end, the income stream suddenly stops.

Essentially, it can be feast or famine, without any guarantee that cash flow will meet financial goals from month to month. Careful budgeting based on average monthly income can help with this. So can considering other business models, such as subscriptions or memberships.

High initial investment in equipment and software

There can be a lot of expense involved in being an online creator. Equipment like cameras, microphones, editing software, and computers are staples for this career and even budget options can be costly.

Footing this bill is daunting, especially before you have a regular income stream, but the tools are necessary to create quality content. Financing options are a great way to offset some of the start-up expenses and relieve financial pressure.

Balancing personal and business expenses

Separating personal and business expenses can be tricky for online creators and the lines can easily blur. It’s common for creators to do much of their work from home and use the same space, tools, and resources for both personal and professional tasks.

It’s an overlap that makes it hard to accurately keep track of business spending, resulting in less financial transparency and tax complications. Careful record keeping is needed to get your house in order.

Tax compliance as a digital business and self-employed individual

Calculating taxes is nobody's favorite task and for self-employed creators it can get pretty complicated. First of all, you need to understand and comply with various tax rules for income tax, sales tax, VAT, and GST to avoid any penalties.

For sales tax specifically, staying updated on the different rates and rules applicable in various jurisdictions is crucial to ensure you're not under or over-collecting.

These rules vary by region and calculating how much is owed every quarter is no easy task. Plus, setting aside the correct amount to fulfill your obligations can be tricky when income is irregular. However, using the right information resources and tools, such as tax compliance software, can make this much easier.

Unexpected expenses and financial emergencies

Unfortunately, some expenses and financial problems can come up unexpectedly when you’re an online creator. A piece of equipment might need replacing or you might need to take a significant amount of time off work due to illness or another reason.

These can be stressful to manage when income is already unpredictable. Creators may find themselves in difficulty when trying to stay afloat – even a single unexpected cost can have a big impact, which is why it's good to always have a financial safety net in place.

Investing in business growth while maintaining cash flow

Staying ahead of the curve in the competitive field of online creation means continuous reinvestment in your business in the form of new tools, professional services, or hiring additional help. Of course, none of this comes for free, and it can be nerve-wracking to spend that kind of money when income is inconsistent.

When considering new digital tools to improve the quality of their content, for example, creators need to focus on architecting a solution that helps their business thrive whilst maintaining financial stability. It’s a careful balancing act.

Pricing services competitively while maintaining profitability

For online creators, choosing how to price services is a delicate business. It’s important to offer competitive rates in order to attract new clients, but under-pricing is not good for your profit margins in the long term.

Tools like RudderStack can be a guiding light in this department, helping creators analyze customer data to get a better understanding of market demand. With that information, they can make data-backed decisions and set fees that reflect the value they offer while not pricing themselves out of new opportunities.

10 Financial Tips for Online Creators

We’ve laid out the financial challenges for online creators, and now it’s time to look closely at the solutions.

1. Maintain clear records for both business and personal finances

When it comes to budgeting and tax matters, detailed financial records are a must for online creators. Categorizing every transaction will help separate personal and business expenses, so when tax season rolls around you’re fully prepared.

Organizing invoices and email communication is also important, to make sure payments are correct and you have a record of work agreements.

Plus, if you speak with clients a lot on the phone, consider an inbound call center solution. This will help you effectively track work calls and the money you’re spending on communication, rather than trying to separate out how much of your mobile bill is business and how much is professional.

2. Utilize digital tools to track income and expenses

Trying to track finances manually takes a lot of time and there is a bigger risk of human error creeping in. Using finance automation tools to help you track income and expenses will make this task a lot easier.

Look for solutions that automate the tracking of revenue and sync with your bank accounts. You will also find that capabilities like expense categorization will help you make short work of keeping your finances organized.

Other features to look for are invoice management, tax calculation, and real-time financial insights. Selecting the right tool can make a big difference for online creators, simplifying financial management so you can spend more of your time on creative work.

3. Allocate a portion of earnings for tax obligations

It can be very easy for online creators to underestimate their tax obligations, which can result in a nasty surprise when payments are due. Avoid this by setting aside a fixed percentage of your income, around 30-35% is a smart amount.

Saving this way will make sure your income and other taxes are fully covered. It’s also important to estimate your quarterly taxes based on projected earnings to make sure you’re always on top of what you owe.

Use tax calculators or other tax software to make sure your estimates for income and sales tax are accurate and avoid making mistakes that run you into trouble.

4. Plan for expenses and map out savings and retirement goals

Immediate expense management is important, as you need to prioritize your current financial obligations. However, it’s also wise to think about long term financial goals like retirement or home ownership.

There are retirement plans that are great for self-employed online creators, such as SEP IRAs, which are specifically designed for small business owners and self-employed people, allowing you to contribute more than a regular IRA while also being tax deductible.

When you begin planning for your long term goals, you will find it helpful to divide income into categories, such as investment and retirement. Allocate funds into each area according to your plans and priorities, allowing you to build a more secure future while growing your business.

5. Diversify income to generate revenue from multiple sources

Online creators can often have a niche and while specializing has its benefits, it doesn’t follow that you should rely on a single income stream. Relying solely on revenue from one source, like YouTube or sponsorships, can be risky.

Markets fluctuate and algorithms change, suddenly throwing a reliable cash flow into disarray. However, you can build financial resilience by diversifying your income. For example, affiliate marketing can be a good additional money earner, which you can get started with on networks like Awin or Amazon Associates.

Another option is digital product sales, such as webinars, courses or ebooks. Platforms like SendOwl support the sale of digital products. Plus, this software integrates with Quaderno to make sales tax management a breeze.

6. Build an emergency fund for unexpected financial challenges

Unforeseen costs can spring up at any time and it’s best to be prepared. If you accidentally spill a cup of coffee over your laptop during an editing session, repairing or replacing it is an urgent and non-negotiable expense.

You need a fund for exactly this kind of emergency to cover unexpected costs without panic or putting yourself into financial difficulty. Set aside a small amount of your monthly earnings to create your emergency fund in an affordable way.

To make the most of your savings, put them into a high-yield savings account (HYSA) which will help your money to grow. Then, when broken equipment or the results of other technology risks cause unexpected costs, you’re in a better position to afford them.

7. Seek professional guidance for financial planning

Sometimes it can pay to call in the professionals. Financial advisors can be incredibly valuable for self-employed creators, helping you with clever financial decisions and making the most of your money.

Personalized financial management advice can assist you with making good investments and working towards long term goals. Some advisors specialize in self-employed people and are experts at helping them to deal with their unique financial situation.

Although professional advice comes at a price, there are affordable options and it’s an investment that can end up earning you more money in the long run.

8. Maximize tax savings through eligible deductions

Self-employed people can often miss out on valuable tax deductions that can reduce the amount of tax they have to pay.

These are deductions that they are often eligible for, such as home office expenses or equipment purchases, software purchased for work, or business travel expenses. To be able to take advantage of these tax savings, make sure to keep meticulous records of your expenses throughout the year.

Expense tracking tools are more effective in this regard than a folder filled with papers or a disorganized file on your computer, as they do much of the work for you. With the proper record keeping and knowledge, you will only pay the tax that you need to.

9. Automate invoice creation, sending, and tracking

Invoicing can take up a lot of time, especially for online creators with a lot of clients. This kind of repetitive administrative work can reduce the time they spend on creating quality content.

Thankfully, it’s now possible to automate invoicing from generation through to sending and tracking. This makes sure invoices are sent in a timely manner and flags you if payment is late.

This can be a huge help for people who are self employed, making it easier to keep on top of payments and send reminders, contributing towards a steady cash flow.

10. Use automation to simplify sales tax, VAT, and GST compliance

When selling goods and services online, sometimes internationally, creators have complicated sales tax, VAT, and GST regulations to deal with. These rules can also vary by region, making compliance a real headache.

The good news is: there’s tax compliance software for digital creators! Solutions like Quaderno help to calculate and collect taxes automatically, while keeping your records straight for easy filing.

You can then rest assured that you’re compliant with all tax regulations and are free to spend your precious time and energy on growing your business.

Key Takeaways

Online creators have to spin a lot of plates to keep their business thriving and financial matters are just one part of it. However, it’s one of the most important aspects of being self-employed and is essential for the success of your business.

Taking steps to manage your finances better, including automating tasks like invoicing, diversifying income streams, and creating an emergency fund, can allow creators to achieve financial stability. This boosts profitability in the short term but also sets the stage for long term sustainable growth.

If you’d like to give Quaderno a try, start a free trial today.

Thanks to our friends at Ardoq for sharing their expertise and writing this article for us!