The Working Student’s Guide to Freelancing and Managing Income

When you need extra income as a college student, your first instinct may be to apply for a coffee shop down the road or maybe the lifeguard stand at your local pool. While these options can certainly offset some of the costs you incur as a student, freelancing can be equally—if not more—advantageous. That said, freelancing does require you to stay on top of your finances, but you can avoid any adverse effects using the right resources and strategies. 

In this guide, we’ll cover the benefits of freelancing as a college student, how it may affect your financial situation, how to prevent pitfalls, and how to manage any financial challenges that may arise.  

Freelancing is a game-changer for students

Freelancing is an excellent option for college students, and may contribute to paying your way through school. According to the Education Data Initiative, the average college student in the United States pays $38,270 for tuition, books, supplies, rent, etc. You don’t need us to tell you that’s a hefty cost. 

Some students may seek part-time or full-time gigs, like waiting tables or working for the university. However, these jobs don’t always allow for the flexibility you may need to focus on your schooling. If your work schedule relies entirely on your employer, your control will be limited. But, with freelancing, you get to make your own schedule. If you can only work between classes in the middle of the day, freelancing can accommodate your needs. Plus, most freelancing gigs allow you to work wherever you want, saving you precious time you may have spent commuting.

How freelancing can support your long-term career goals

Compared to other gigs, freelancing is a great way to gain professional experience that directly aligns with your career aspirations. Future employers who see a portfolio of your previous work and a resume of your freelancing experiences will know you’re familiar with working on client projects, meeting deadlines, and managing your workflow.

If you want to pursue your freelance career after college, starting early will allow you to build your brand and network. With each project, you establish yourself as an expert in your field, positioning yourself for more significant opportunities and creating a professional identity that resonates in your industry.

Many college students who graduate may struggle to build professional skills they can easily translate into a work environment, but freelancing gives you a headstart. For example, if you want a career in web development, you can gain certification and offer your services. Building these skills now, instead of later, will make you more desirable to employers once you graduate. 

If, after you graduate, you like your freelance work and can successfully retain clients, you can also start your entrepreneurial career, potentially hiring employees and scaling your business. 

Financial challenges faced by freelancers

While there are several benefits to freelancing as a college student, managing your finances can be a challenge for several reasons:

• Irregular income: If you don’t have a regular flow of client work, you won’t have a consistent paycheck.
• Difficulty budgeting: With inconsistent paychecks, creating a stable budget becomes challenging. You may struggle to balance paying for school supplies, personal expenses, and occasional emergencies while managing unpredictable income streams.
• Tax responsibilities: Unlike traditional jobs, freelancing gigs require you to track and pay your own taxes (rather than having taxes withheld from your paycheck, which is what happens when you work a regular job). If you don’t track and set aside the deduction amounts, you’ll owe quite a bit come tax season. Plus, navigating tax laws and making sure you’re staying compliant can be challenging, to say the least.
• Lack of financial cushion: As a student, you may not have a financial cushion to support you in emergencies when you run out of client work.
• Undercharging for services: As a young person, you may be tempted to undercharge your services to encourage clients to hire you—and this can affect your income.
• Delayed payments: Clients sometimes pay late, creating cash flow issues. If you rely on freelance income to meet tight deadlines for tuition or rent, delays can lead to financial stress.

With these financial challenges, freelancing can quickly become overwhelming.

How to manage and overcome financial challenges

Sure, it’s tough, but with some careful planning, you can overcome the challenges laid out above. Below, we’ll walk you through: 

• How to manage your income and expenses
• How to understand, plan for, file, and pay your taxes 

Managing your freelance income and expenses

While you may face several financial challenges as a freelancing student, there are ways to overcome them to maintain financial stability. 

Tracking expenses

For one, tracking your expenses—both personal and professional—is imperative. Keep a detailed record that includes tax deductions so you’ll be prepared for tax season. This record may also help you determine to cut unnecessary costs (like too much takeout). You should also set aside some of your finances for an emergency fund, which you’ll need if client work becomes sparse. 

There are plenty of digital tools you can use to help you organize your budget. For example, spreadsheets you might find on Excel or Google Sheets are easy to use and accessible to students. However, using software like QuickBooks Self-Employed or Mint may be more efficient as these types of software automate many processes while tracking your income and expenses. You can also use these tools to access graphs and data to provide a more transparent picture of your financial well-being. 

Ultimately, your choice of tools — a notebook or user-friendly software — depends on your needs. It’s best to evaluate what you need to track your income and work from there. 

Set up a payment process

Next, you want to make sure to set up an efficient payment process. Every paycheck matters when your budgeting constraints are tight. You’ll need prompt payments to pay rent, get groceries, and attend school—a late paycheck can throw off your whole month. But, with careful planning, you can easily prevent this from happening and stay happy with your freelancing side gig. 

Be sure to provide prompt, professional invoices and provide clients with a streamlined payment process. Include essential details like your services, payment amount, due date, and preferred payment methods in these invoices. Before you send your invoice, let clients know about payment expectations you may have, such as if they may need to pay a deposit, milestone payments, or net 30 terms. These options can keep you financially secure as you work and won’t leave you unstable if a client decides to break a contract or is late with their payments. 

You can also use different platforms to receive payments. However, each option comes with its pros and cons. For example:

• PayPal: Widely used and secure, PayPal allows you to send invoices and receive payments quickly. However, transaction fees can add up, especially for international payments.
• Venmo: This simple option for small payments is convenient. However, it lacks professional invoicing features and may not be ideal for more significant or business-oriented transactions.
• Direct deposit: Clients can be a safe way to transfer finances to you directly into your bank account, but they might need to set up their own at your bank, which may not be feasible.

A reliable alternative to these options is online payroll solutions. These services automate invoicing and direct deposits while tracking income streams across clients. Not only is this service more professional, but it’s more reliable, too — offering a secure way for clients to pay for your goods or services. 

Payroll tools can also simplify income management if you have multiple income streams or subcontract with others. Many automate tax calculations, track payments, and handle direct deposits, ensuring you stay organized and compliant. This way, you don’t have to constantly stress about your finances or whether you need to save for tax season beforehand.

Understanding taxes for freelancers

The IRS considers any freelancer self-employed, and they have differing tax obligations from those of someone employed. For one, you have to pay a self-employment tax. This tax covers Social Security and Medicare contributions, totaling 15.3% of your net earnings. Unlike traditional employees, freelancers pay the employee and employer portions of these taxes. On top of that, you’ll also owe federal and, in some cases, state income taxes. Familiarizing yourself with these obligations early on will help you better plan for tax season.

Handling these obligations as a student can quickly become stressful, especially if you want to avoid penalties and stay compliant with the IRS. The best way to avoid these outcomes is to estimate your quarterly taxes, which includes the following steps:

• Estimate your annual earnings: This includes any income you receive from clients or customers because of your goods and services. 
• Subtract deductible expenses: Any expenses you spend on your side hustle you can claim as a deduction, including software subscriptions, office supplies, internet and phone bills, and travel expenses. A detailed record of your deductible expenses is essential because it can minimize your tax liability.
• Use the 1040-ES form: The IRS provides this form to determine your taxes on any income an employer isn’t withholding.
• Divide the total amount into four payments: You’ll use these amounts to pay your quarterly taxes throughout the year.

Quarterly payments are due on April 15, June 15, September 15, and January 15 of the following year, so keep a calendar (with alerts!) to stay on top of the deadlines. 

Using reliable payroll software that can monitor your tax liabilities can help you remove a stressor from the equation, allowing you to focus more on your other responsibilities. Tools like Gusto can help you track your income, expenses, and tax deductions all in one place. Many tools also provide regular reports to estimate your quarterly payments, so you don’t have to spend extra mental energy making the calculations yourself. These tools also categorize expenses and provide a clear breakdown of your earnings, so you’re not scrambling to organize receipts or track down payments when it’s time to file. Overall, you can save work hours just by using the right software. 

Resources for student freelancers

Luckily, there are tons of tools to keep you organized and get your freelancing business off the ground. Check out these resources:

Financial tools and software

• Gusto Payroll Tools: Gusto calculates your taxes, direct deposits, and benefits, making it easier to handle payments professionally.
• QuickBooks Self-Employed: QuickBooks Self-Employed helps you track income and expenses while offering invoicing tools and quarterly tax estimation features.
• Mint: Mint manages budgets, tracks spending, and helps you set financial goals.
• PayPal: PayPal allows freelancers to send and receive payments securely. It offers added features like invoicing, payment tracking, and a user-friendly mobile app.
• Venmo: Venmo is a quick and easy payment solution for freelancers, perfect for receiving payments from clients or splitting expenses with collaborators.

Educational freelance resources

• Freelancers Union: Freelancers Union offers a supportive community and resources to help freelancers navigate any challenges associated with freelancing. 
• Upwork Blog: This blog provides actionable tips to refine your freelance skills, improve client relationships, and grow your business.
• Skillshare: Skillshare offers classes on marketing, graphic design, and productivity.
• Udemy courses: Udemy offers courses to enhance your freelancing skills related to business, marketing, and more. 
• IRS Self-Employed Tax Center: The IRS Self-Employed Tax Center provides essential tax resources for freelancers, including guides on quarterly payments, deductions, and filing during tax season.

Productivity and organization tools

• Trello: Trello is a project management tool that uses visual elements to help users keep track of tasks.
• Asana: Asana is another project management tool that prioritizes and tracks tasks.
• Google Workspace: With tools like Gmail, Google Drive, Docs, and Calendar, you can store project files, email clients, and manage your schedule.
• Notion: Notion helps you keep track of notes and projects. 
• RescueTime: RescueTime tracks your time spent on tasks and provides insights on improving focus and time management.

Networking and career development resources

• LinkedIn Learning: LinkedIn Learning offers courses on professional development, industry-specific skills, and networking strategies.
• Fiverr:  With Fiverr, you can showcase your services and connect with clients.
• Upwork: Upwork is an online network that allows freelancers and clients to connect.