So you got paid: now what? Mastering project finances as a baby entrepreneur.
Congrats! You’ve just received your first payment as an entrepreneur. But now comes that part—managing the money wisely to set you up for future success. Knowing how to manage your finances is what will truly ensure long-term growth for your business. Here’s our advice on managing your finances as a baby entrepreneur.
Recognize the difference between gross and net pay
The first thing to understand is that not all the money that comes into your account is “yours.” When you’re paid for a project, you’re typically looking at the gross payment—the amount before any deductions (like taxes and business expenses). It’s essential to know what to expect when it comes to taxes, expenses, and savings.
It’s important to get clear on your fixed expenses—the costs you incur regularly to keep your business running. These are the tools, subscriptions, and services you use on a monthly or annual basis. Whether it’s software, professional memberships, or the basics like your website hosting, having a clear picture of these expenses is key.
Recommendation:
Start by listing everything that you pay for regularly to do your work. Here are a few examples:
💻 Software: Do you pay for tools like Adobe Suite, project management software (Trello, Asana), or design tools (Canva, Figma)?
🗒️ Subscriptions: Maybe you have a subscription to a stock photo library, email marketing platform, or business insurance.
🌐 Website & Hosting: Include the cost of your website domain, hosting fees, and any maintenance or security services.
✨ Marketing & Advertising: If you’re running ads or using services like Google Ads, Instagram promotions, or freelance platforms, track these costs.
🍸 Business-related tools & services: Think about any services that help you run your business smoothly, such as accounting software, productivity tools, or even collaboration platforms.
By keeping track of these fixed costs, you’ll have a better idea of how much you need to set aside to keep your business running smoothly each month. Once you know these numbers, you can better allocate your incoming payments and plan for savings.
Our tip:
Don’t just “pay and forget” about your annual expenses until next year! Take all your annual costs and divide them by 12, then set that amount aside each month in a dedicated savings fund. This way, when it’s time to renew your subscriptions and memberships, you’ll already have the funds ready to reinvest.
The (not so) fun part: set aside money for taxes
As a new entrepreneur, it’s easy to overlook the importance of taxes until tax season rolls around. But in reality, taxes are an ongoing part of your business journey. Depending on where you live and your income level, you might need to set aside a portion of your earnings to pay the government.
Luckily, we got you covered. We created a beginner-friendly income calculating sheet, designed to help new freelancers and business owners easily calculate their net income, project rates, and expenses—without the overwhelm. Download it here. It’s FREE!
Recommendation:
PLEASE take the time to understand your tax obligations, deadlines, and requirements. These vary by country, and it’s your responsibility to be prepared and informed. Also, keep an eye out for government grants or tax relief initiatives that may apply to your situation. Ask your accountant for updates, search online, and check your government’s resident portal for relevant information.
Set aside at least 20-30% of your income for taxes. This often includes expenses like health insurance, pension contributions, and other state welfare obligations, which may be either fixed or percentage-based depending on your country.
Our tip:
It’s a good idea to set up a separate savings account specifically for taxes, so you don’t accidentally use those funds for business or personal expenses. Some banks offer the option of creating “pockets” within your existing account, making it easier to separate your savings. If you’re unsure how much to save, consider consulting a tax professional.
Emergency fund: protecting your business
As an entrepreneur, you’ll likely face periods of feast and famine. Some months will be booming, while others might feel slower. That’s why building an emergency fund is a must. It’s your financial cushion in case of unexpected slow periods or business expenses. Get into this habit early on, you will thank yourself.
Recommendation:
Set aside at least 5-10% of each payment into an emergency fund. This way, when business dips, you have a buffer to rely on. We recommend putting this money into a high yield saving’s account to earn interest and help it grow (you might as well make some extra $$$ while it’s sitting there!)
Pay yourself: salary vs. reinvestment
Now that you’ve got some money in your account, you might be tempted to treat yourself, but remember: paying yourself appropriately and strategically is key to building a sustainable business. Salary refers to the amount you take home for your personal expenses, while reinvestment is money you put back into the business to fuel its growth.
Recommendation:
In the early days of entrepreneurship, keep your salary modest. As a general rule, it’s often wise to pay yourself 40-60% of your income while reinvesting the rest into your business. Use the funds to grow—whether that’s improving your skills, upgrading your equipment, or running paid ads. However, this approach is personal and should be tailored to your unique needs and goals.
Managing profit and growth: forecasting your future
Understanding where your business is headed financially is essential. While it’s exciting to get paid, planning for future growth and upcoming expenses is equally important. Financial forecasting helps you predict income and expenses, which can keep your business on track for the next few months.
Recommendation:
Use simple tools like spreadsheets or forecasting software to estimate what your income and expenses will look like over the next 3-6 months. Take into account both steady and variable income, like one-off project payments or ongoing client retainers. This way, you’ll avoid surprises and ensure you’re ready for the future.
You can use our easy-to-follow template to
Work out your ideal rate to hit your income goals
Figure out your real take-home pay after taxes, fees & expenses
Set smart rates so you’re not undercharging
Plan ahead and track your earnings with confidence
Free download available here.
Our tip:
Get into the habit of reviewing your goals and milestones: we like to do this on the last Sunday of each month (light your candle, put a face mask on, wine glass in hand and let’s get counting). Regularly reviewing your financial health will give you a clear picture of where you stand, and it’ll also help you spot any areas of improvement.
Look at your income, expenses, savings, and investments to ensure you’re hitting your targets. There are hundreds of software or apps that keep track of everything. Or if you like a little free DIY project, build yourself a spreadsheet. The more proactive you are about reviewing your finances, the easier it will be to stay on top of your money.
Recommendation:
Create clear financial goals for yourself, both short-term and long-term. Stick to them. If you’ve set aside money for taxes, business expenses, and savings, stick to that plan. Don’t get carried away by the temptation to spend too much on personal luxuries, especially in the early stages of your business.
Conclusion
Mastering project finances might not be the most glamorous part of entrepreneurship, but it’s one of the most important. By understanding how to allocate funds for taxes, expenses, growth, and savings, you’ll lay a solid foundation for your business’s long-term success.
Start by setting clear financial boundaries: save for taxes, build an emergency fund, reinvest in your business, and track your finances regularly. And remember, discipline and patience are your best friends when it comes to managing your money. We’re working for our rich auntie era, remember that.
