So you’re enjoying the awesome perks associated with being a freelancer — you make your own hours and are your own boss. However, the downside is that since you are independent and lack the backing of a regular company and a regular paycheck, you need to ensure that you keep your finances in check. To do so, you will need to budget, plan ahead, and make the right moves to create a financial safety net should your work dry up.
Let’s talk about six money management tips that can help you to thrive as a freelancer.
1. Create a Budget
In order for the rest of the tips on this list to make a difference, you first need to create a comprehensive budget so you can account for all incoming and outgoing funds. Since you likely get irregular paychecks, you will need to make some estimations with your budget. Look at the past year and take note of the average amount of money you make each month. Then, compare those potential earnings with your current expenses.
Keep in mind that your budget can be fluid from month to month. If you make more in March than you did in January, then you can adjust your budget and bring on more necessary expenses.
2. Save Money However You Can
You can also make your budget more manageable by eliminating flexible expenses that you don’t necessarily need. It might be nice to get Starbucks and stream your favorite show for inspiration, but if you can’t realistically afford these perks, then consider eliminating them for now. Once you start earning good money again, add them back one by one as your budget allows.
Here’s a real example: Last year, when my income dipped for a while, I canceled HBO Max and a couple of other streaming services. It was only several dollars, but every little bit helped.
However, if you don’t want to cut these little luxuries out of your life, look into passive income apps like Honeygain, which can help you earn money without putting a lot of effort and time into it.
Working from home can also help you save a lot of money on expenses as you may not need to purchase expensive outfits or pay for expensive maintenance on your vehicle. However, if you need to travel for your work, you can also save money outside. For instance, you can save money on gas by ensuring that your tires are properly inflated and by driving at a reasonable speed.
3. Find Higher-Paying Clients
Another way to earn money to balance the budget is to find higher-paying clients. If you have been at your freelance work for a while, then you may be able to bring your rates to the next level. You can find higher-paying work by putting your best samples on your website as well as glowing customer reviews, so potential customers will be motivated to pay top dollar for your great work.
If you are delivering high-quality work and your clients love what you do, then the issue may be that your rates are too low. When you are figuring out a fair rate for your work, you need to look at how much you need to earn to live and keep a roof over your head and then charge accordingly. Once you figure out a rate, stick to it. Your work is worth it.
4. Keep Track of Your Time
When you are a freelancer, you don’t have a payroll system where you can clock in and out, so you will need to keep track of your time. There are several benefits to tracking your time. One big benefit is that when you track how long each task takes, you can streamline your processes so you can get more done in less time. You are also more likely to get work done in a timely manner so you can shut your computer and enjoy a work-life balance.
My recommendation: Toggl Track is free and allows you to track time super easily!
The other benefit to tracking your time is that you can accurately bill the clients for your time. If you are being paid hourly, then you do not want to set yourself short. Start a timer every time you begin an assignment and get the money you deserve.
5. Save for Emergencies and Retirement
If you find that you have a surplus of funds, then it is a good idea to open a savings account that can act as an emergency fund of sorts. This is an account that should not be touched unless you are facing a financial emergency or rent is due, and you won’t have the cash to pay it.
This is also a good way to save for retirement. Consider a high-interest savings account that will grow with time. You can also consider a traditional or Roth IRA. If you are concerned about retirement, then contact a financial advisor.
6. Don’t Forget About Health Insurance
One of the perks of working for a traditional company is that you have access to health insurance, but as a freelancer, you are essentially on your own. Luckily, you can obtain high-quality insurance by visiting the healthcare marketplace, where you can find suitable plans that meet your budget. You may also be able to get onto the health plan of a significant other. When it comes to important expenses like insurance, savings, and retirement, it is a good idea to set up a separate account. When you get paid, put a portion in that secondary account and only use that money for the applicable expenses.
As you can see, there is a lot to consider when it comes to finance for freelancers. Consider the tips discussed here, and you will be in good shape now and in the future.