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financing for freelance translators finance

Finance Tips for Freelance Translators (Part 1)

financing for freelance translators finance

By Maeva Cifuentes

Opening a separate business account 

So you’re a freelance translator and you’ve started making a steady income (or perhaps you have already been doing this for a while and haven’t gotten around to figuring out your finances). Don’t worry, it happens to many of us, but I urge you to sort out your finances sooner rather than later. Wouldn’t it be nice to know how much money you’re making per month, which eventually will help you set your rates and manage your time more appropriately? You might even make more money after you get your finances in order!

*Please note I am not an accountant nor a lawyer and this information should in no way be considered advice from an accountant or a lawyer and it also depends on many factors, including geographic location. Nonetheless, it will probably be helpful to get you started.

I long had the propensity to push off organizing my finances. I would rationalize this by telling myself I didn’t make enough money or that filing my personal taxes would be enough. I’ve finally accepted that as a freelance translator, i.e. a sole proprietor of a translation business, it is essential that I understand my finances and keep them in order.

That’s why I’m starting this ‘finance for freelance translators’ series, to explain to those who are at the position I was before (borderline indifferent and ignorant) how to get to the where point I am now (pseudo-freelance finance expert*!).

If you perform a quick internet search on how to sort out your freelance financial situation, the first tip you’ll see in most places is simple: separate your business expenses from your personal ones.

The most straightforward way to do this is to open a new business checking account. All I did was upgrade my PayPal account to a business account and get a PayPal debit card. I amended my payment information in my clients’ databases so that all payments would go directly to this account and – more importantly – now make all business-related purchases and payments from this account. That way, when tax season comes, you can refer (or have your accountant do it) directly to this account and there will be less disorder when sorting out business expenses from your personal ones. And don’t forget to “pay yourself” a paycheck every month, from your business account into your personal one (best part is you can use that money how you please!).

If you’re anything like I was, I imagine you’re now asking yourself, how do I distinguish business-related expenses from personal ones? The freelance translator is a being that is so involved with her work, so obsessed (passionate?) with language and learning, that it’s hard to discriminate sometimes what’s for business and what’s for pleasure. That’s why I’m here to help.

Here are some expenses that a typical translator can consider a business expense (and accordingly use your business account to pay for):

  • Your computer (though come tax season, you can only deduct from this cost the percentage that was used for business)
  • Office rent (home office rent probably won’t come out of your business account, we’ll cover this in a later segment)
  • Purchase of CAT tools and their upgrades and other software (not video games…unless you’re a video game localizer!)
  • Membership association fees (ProZ, ATA, ITI, etc.)
  • Advertising
  • Continuous professional development (yes – that means webinars, courses, etc.)
  • Conferences and trade shows
  • Business travel (mostly for interpreters)
  • Contracting fees (your editor, sub-contracting translator, website designer, etc.)
  • Newspapers and magazines – yes, that means the ITI Chronicle; no, it doesn’t mean Vogue (unless you’re a fashion translator – check with your accountant)
  • Translation- and interpreting- related books
  • Client entertainment (use your business account if you take a client out to dinner)
  • Books related to your subject-matter specialization

These are all things that later you will most likely be able to deduct from your taxes, which we’ll talk about in a later session.

I hope part 1 of my extended finance series was useful. Let me know if you’d like me to cover any other topics. Next time: tracking invoices

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