How much should I set aside for taxes?

When transitioning from corporate life to freelancing, one of the big shifts you'll face is handling your own taxes. It can be a tricky adjustment, but it's essential to get it right from the start. A general rule of thumb is to set aside about 25-30% of your income for taxes. This covers federal, state, and self-employment taxes, though the exact percentage could vary depending on your specific circumstances and where you live.

When I first made the leap from my engineering job to freelancing, I learned the hard way how important it was to be diligent about this. One quarter, I didn't set aside enough, and it was a tough lesson in financial discipline. I recommend setting up a separate savings account for tax savings and transferring a portion of each payment into it. This way, you’re not caught off guard when tax season rolls around.

Also, remember to track all your business-related expenses—they’re deductible and can lower your taxable income. Investing in a good accountant or tax software early on is invaluable. It might feel like a steep upfront expense, but having expert guidance will save you stress and potentially money in the long run.

Finally, take a moment to redefine what financial success looks like for you. It’s not just about the money coming in but also about effectively managing and sustaining that income. Taxes are a part of that equation, and getting comfortable with them is a step toward greater financial freedom in the freelance world.