By Andre Shammas
Over the years, I’ve worked with a growing number of freelancers, side hustlers, and gig workers—from graphic designers and Uber drivers to Etsy shop owners and part-time consultants. One thing I’ve learned is this: freelancing offers incredible freedom, but it also demands financial discipline.
When you’re working for yourself—even part-time—nobody is automatically taking out taxes, tracking your business expenses, or planning for your future. It’s all on you. That might sound intimidating, but with the right knowledge and systems in place, you can set yourself up for long-term financial success.
Here’s what every freelancer and side hustler should know about budgeting and taxes, from my desk at Shammas Bureau to your kitchen table.
Budgeting: Treat Your Side Hustle Like a Business
Even if your side gig started as a passion project or a way to make a little extra cash, the moment it brings in income, you’re running a business—and your budget should reflect that.
Separate Business and Personal Finances
Open a separate bank account just for your side hustle. This makes tracking income and expenses easier and helps avoid confusion when tax time rolls around. It also gives you a clearer picture of your actual profit.
Plan for Irregular Income
Unlike a traditional job with predictable paychecks, freelance income often fluctuates. Create a baseline monthly budget that covers your essential expenses using your lowest expected income. Then, use any extra income from good months to:
- Save for lean months
- Invest in business tools or training
- Build an emergency fund
This system helps you avoid the feast-or-famine cycle that many freelancers fall into.
Pay Yourself First
Many freelancers forget to compensate themselves properly. Try this method: once a month, pay yourself a portion of your net income (after setting aside money for taxes and business expenses). Think of this as your “paycheck.” It makes your finances more stable and predictable.
Taxes: Know What You Owe (Before the IRS Does)
Taxes work very differently for freelancers than for traditional employees. If you’ve made $400 or more from self-employment during the year, you’ll likely need to report it and pay self-employment taxes—on top of income tax.
Understand Self-Employment Tax
Self-employment tax covers Social Security and Medicare, which are typically split between employee and employer. As a freelancer, you pay both sides, which is currently 15.3% of your net earnings. That’s on top of any income tax you may owe based on your tax bracket.
It’s a hefty bite, but the good news is you can deduct the “employer portion” of your self-employment tax from your taxable income.
Make Quarterly Estimated Payments
Because taxes aren’t automatically withheld, you’re expected to make quarterly estimated tax payments to the IRS (and possibly your state). The deadlines are:
- April 15
- June 15
- September 15
- January 15 (of the following year)
Miss a deadline, and you might face penalties and interest. To estimate how much to pay each quarter, set aside 25%–30% of your freelance income and consult a tax professional or use IRS Form 1040-ES.
Deductions: Know What You Can Write Off
One of the biggest advantages of freelancing is the ability to deduct legitimate business expenses. These deductions reduce your taxable income, meaning you’ll owe less.
Common Deductible Expenses Include:
- Home office (if used exclusively for business)
- Business-related software subscriptions
- Mileage or car expenses for business use
- Internet and phone (business-use portion)
- Marketing, website costs, and advertising
- Professional services (like a tax preparer!)
Keep detailed records and receipts for every deduction you claim. In the event of an audit, documentation is everything.
Don’t Guess—Track
Use an expense tracking app or spreadsheet to keep your income and expenses organized throughout the year. When April rolls around, you’ll be grateful you didn’t try to piece it all together from memory.
Retirement and Insurance: Protect the Bigger Picture
As a freelancer, you’re on your own when it comes to benefits like retirement savings and insurance. It’s up to you to build that safety net.
Open a Retirement Account
Consider opening a:
- Traditional or Roth IRA if your income is under the limit
- SEP IRA or Solo 401(k) if you’re earning more and want higher contribution limits
These accounts not only help you save for the future but may also provide current-year tax benefits.
Budget for Health Insurance
Health insurance isn’t just a nice-to-have—it’s essential protection. If you don’t have coverage through a spouse or another employer, explore your options through Covered California or other health marketplaces. You may qualify for subsidies based on your freelance income.
You’ve Got This—Just Don’t Go It Alone
Freelancing is one of the most empowering ways to earn a living. You control your time, your income potential, and your professional path. But that freedom comes with responsibility—especially when it comes to budgeting and taxes.
The good news? With just a few smart habits—tracking your income, setting aside money for taxes, and keeping your records in order—you’ll be far ahead of the curve.
And if you ever feel overwhelmed, remember that you don’t have to do it alone. At Shammas Bureau, I work with side hustlers and full-time freelancers alike to simplify tax season, uncover deductions, and create financial systems that actually work.
The side hustle may start small, but with the right approach, it can make a big impact—not just on your income, but on your long-term financial freedom.